SOME of beneficiaries of education loans from Higher Education Loans Board may from next financial cycle in September be given smart cards instead of cash to cut down on frivolous expenditure.
Once implemented, successful Helb student borrowers will have electronic wallets instead of cash wallets in their bank accounts. The e-wallets will be designed in a way that the holders can only spend Helb money on intended purposes that primarily cover tuition, library and accommodation costs.
The move will most likely hit hard first time university students who are known to spend some of the cash on entertainment. Chief executive Charles Ringera said seven commercial banks have been cleared to develop electronic systems to facilitate the transition to the smart cards disbursements.
Ringera said installation of the systems was at an advanced stage at two of the banks and piloting could begin at the beginning of next academic year in September.
The banks, which he declined to name, are partnering with their client universities. KCB bank, for example, has been working with Egerton University and they could start piloting in September.
Family bank is also said to have made some in-roads in developing the system. "Helb will evaluate the systems before the banks can start piloting them in the collaborating universities," Ringera said in a telephone interview yesterday. "They can't start marketing the e-wallets until we have certified them." Dedan Thairu, a third year student at Egerton University, said on phone the move would instill financial discipline in students.
Mugure Njeri, a student at University of Nairobi's School of Humanities and Social Sciences, however disagreed saying lifestyles of most university students will be inconvenienced.
"We should be allowed to use the money the way we want because it is a loan which has interest on top," she said on phone. "If they restrict us, it's unfair and life will get difficult."
Helb expects the transition to smart cards to be fully embraced in two to three years. Ringera said the move will compliment its ongoing efforts to rid the state-run higher education credit agency of burgeoning bad loans, now in excess of Sh7 billion.
This is because prudent expenditure by students will help grow their reputation collateral which will help secure them development loans from commercial banks after college, the Helb chief said.
"We are working with the private sector to blacklist those who default...so they will not access credit after school until they pay their loan," he said. Last year's drive that allowed defaulters to voluntarily clear their outstanding arrears interest free netted just over Sh1.2 billion.
The recovery efforts, Ringera said, will continue this year with diaspora community being one of the key targets. The diaspora creditors will be allowed to pay up through the more convenient e-commerce payment platforms.
"Some of the defaulters are in diaspora and we shall having a meeting with some of them in the UK sometimes next month," he said. "We are finalising on mechanism to enable them pay through plastic cards and even payPal." The board offers education loans of up to Sh150,000 but has set eyes on an ambitious Sh2.5 million by year 2030.