Rwanda: BRD Seeks to Streamline Recovery of Student Loans

The Development Bank of Rwanda (BRD) says said that it will continue courting different strategic partnerships with different institutions to address the challenges encountered in recovery of students' loans.

Emmanuel Murangayisa, the Senior Manager for Education Financing Department at BRD told The New Times that fresh strategies are based on the fact that very little of the loans have been recovered so far considering the arrears of graduates who studied under government scholarship since its inception around 1980 up to now.

"So far around Rwf188 billion has been disbursed," he said adding that the bank has so far disbursed Rwf118bn for students to study tertiary education while billions more were disbursed by REB and SFAR.

REB is Rwanda Education Board and before this, the tertiary education loans were disbursed through what was called the Students Financing Agency of Rwanda (SFAR).

However, the official said that from 2016, BRD managed to recover only Rwf7.5 billion.

The total numbers of graduates who have been given loans under the scholarship scheme so far are approximately 94,000; 67,000 by REB and 27,000 under BRD.

"We have so far issued 85 clearance letters to loan beneficiaries while others are still in the process of paying," Murangayisa said.

"The most important is to know who benefited from the scheme and untimely declaration by beneficiaries or their employers".

Another challenge was the failure by employers to deduct the student loans from the employees' salaries, especially those in the informal sector where people don't have fixed salaries as they generate income on an irregular basis.

"Indeed the bank is aware of such clients and we're exploring other payment options, especially discussing with each loan beneficiary a repayment schedule aligned to her/his income stream. However, the issue remains the monitoring mechanisms for such loan beneficiaries."

Resorting to IT

Murangayisa said they were in the process of putting in place strategies, one of them being the recently established Education Finance Management Information System (EFMIS).

"With the EFMIS, the bank has engaged and will further engage different strategic partnerships with different institutions to have such issues addressed. Also, it is quite challenging to reach out to the beneficiaries in the informal sector.

"Most of the repayments received is now recorded into the EFMIS system. That means we can track he cash received and that expected," he said.

He reiterated that such technology is being taken of advantage in a variety of ways including dissemination of information through different platforms, engaging partnerships with some data institutions in terms of block-chain creation for data integration to address different gaps in terms of recoveries.

"Other ways include electronic payments including Mobile Money payments among others are to be used. Such payment options have been employed by other bodies handling students' loans and have proven successful.

"However, enhancing systems is always a process and we are committed to paying attention to whatever innovations that shall be required to improve recoveries," he added.

He, however, he said, the law provides for a waiver on the deceased and those who have permanent disabilities and cannot afford to pay their study loans.

Beneficiaries, PSF speak out

Some of the graduates who benefitted from the loan scheme but preferred anonymity shared mixed feelings over the loan repayment.

"It is good to pay, but charging 8 per cent per income is still high. It should at least be around 5 per cent. Some evade repaying the loan due to high charges. Affordable ways of loan repayment could make loan recovery effective," said one employee of the district in Kigali city.

The source added that another issue is lack of ways to update the beneficiaries on the progress in repaying via any information system.

"Due to lack of such a mechanism, they can even continue charging you despite having cleared all things. They should send SMS or email telling how much you have repaid and the amount you still owe them," he said adding that charging those who work in the informal sector should be thought out carefully.

To these concerns a BRD official told The New Times that updates are done progressively though some are over-deducted.

"This is a concern for both the beneficiaries and their employers. For the bank provides the amount of loan owing on each and their respective monthly deductions. It is, therefore, the primary concern of both the beneficiary and their employer to know when deductions started and when they should end so that timely interventions are made.

However, given the EFMIS and its integration with the IPPIS the un-updated repayments are significantly dropping. Also, over-deductions are refunded given satisfactory documentation," he said.

While those in informal sector recommend only those with employment contracts to repay, others propose repayment options.

"Whatever income I earn, they can deduct little but that does not frustrate. There should a formal government system that monitors every beneficiary and how they generate income and use it as Rwanda Revenue Authority does and then charge based on individual income," added another employee in one of private Radio Stations.

Robert Bafakulera, the Chairperson of the Private Sector Federation (PSF) advised BRD to devise joint strategy in which they are also involved.

"To repay the loans, PSF has a big role. But BRD has not yet involved us in the best strategic way we can work together. If they have realized that some employers in the private sector are dodging as they do not engage their employees in repaying the loan, we are ready to investigate and study how to discover and address them.

As private sector is monitored in terms of taxes declarations, it must go with loan recovery. We urge employers to declare employees owing loans based on a database that BRD can share to us," he said.

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