Business Daily (Nairobi)
Mwaura Kimani
14 January 2008
The Higher Education Loans Board (Helb) is set to float a Sh7 billion education bond to raise money it needs cope with rising demand for its services among university students.
The board plans to package its Sh7.4 billion performing loans portfolio into sizeable corporate bonds products that can be listed on the Nairobi Stock Exchange.
Such a listing would be the first in a market that remains dominated by corporate and government bonds and would open the door for other service providers to follow suit.
Although no date has been set for the listing, the bonds offer is among a raft of plans that Helb is considering as it prepares for tough times at the start of the year.
Demand for loans is expected to rise significantly following a recent policy change that allowed privately sponsored students to benefit from the kitty.
There are more than 10,000 privately sponsored university students in public universities who will qualify for the Helb loans beginning September. These new applications are expected to be worth Sh300 million.
A recent decision by the Joint Admissions Board to lower the admission cut off is expected to hit 16,000 mark adding an extra Sh300 million to the Helb's Sh1 billion annual lending budget.
Mr Benjamin Cheboi, the chief executive, said Helb plans to securitise the loans to reduce the credit risk in its balance sheet. Reduced risk should help lower interest rates and save on costs.
Securitisation has been a preserve of financial institutions, mortgage companies, leasing and insurance firms.
Treasury allocates Sh800 million annually to the agency but with a steep increase in the number of applicants the amount remains inadequate.
The bonds market recently listed Barclays Sh5 billion and Sasini's Sh600 million issues that were fully subscribed signalling high demand for long term debt.
Listing of the bond could mark the beginning of the end of Helb's reliance on Treasury for handouts.
If Helb succeeds in issuing the bond, it will be following in the footsteps of successful university financing outfits like the Students Loans Marketing Association (Sallie Mae) of the United States.
Sallie Mae was first established in 1972 as a government sponsored enterprise under the Federal Family Education Loan Programme, but is now a listed company that helps millions of American students realise their dream of accessing higher education.
Mr Cheboi said Helb plans to embark on a multi-million media campaign and awareness programme to boost its loans servicing revenue in readiness for the bond.
A similar campaign last year saw total loans repaid in November rise to Sh125 million from Sh106 million in October.
Mr Cheboi said the average monthly repayment before the initiative was launched stood at Sh90 million.
The Board also plans to set up a job link website this year where graduates can post their qualifications and employers advertise vacancies.
Helb is hoping that parliament will pass the Credit Referencing Bureau Bill to enable it engage debt collectors -including auctioneers- in recovering its money from defaulters. This approach will mainly target graduates in the informal sector.
The law provides for beneficiaries who refuse to service the debt to be declared un-creditworthy, making it difficult for them to access loans from commercial banks and other lenders.
The Board hopes to slash the Sh6.9 billion loan portfolio by Sh2 billion being held by at least 60,000 defaulters by close of the next financial year.
Over the last 10 years, Helb has recovered Sh6.9 billion, but projects the figure to hit Sh8 billion by September.
At least Sh1 billion was recovered last year, up from Sh896 million the previous year, the highest in the commission's history since inception 11 years ago.
Be the first to Write a Comment!
Copyright © 2008 Business Daily. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.
AllAfrica aggregates and indexes content from over 125 African news organizations, plus more than 200 other sources, who are responsible for their own reporting and views. Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica.
