The Higher Education Loans Board (HELB) is set to partner with the Kenya Revenue Authority (KRA) in a renewed effort to recover billions of shillings in unpaid student loans from borrowers working in the informal sector.
Speaking during a television interview on Tuesday, HELB Board Chairperson Ekwee Ethuro said recovering loans from informal earners has remained one of the board’s biggest challenges since, unlike salaried employees, they are not covered by automatic payroll deductions.
He said HELB is now looking to leverage KRA’s extensive data systems and nationwide reach to trace borrowers who have remained outside the formal employment system.
“That’s why we are exploring partnerships, and the KRA partnership is a very viable one. They have better systems and a wider reach,” Ethuro said.
HELB reports that more than 380,000 people are in arrears in repaying their loans, with 124,000 being classified as chronic defaulters. The latter group includes 83,000 who haven’t made repayments for over ten years and have been listed as CRB defaulters.
According to HELB, many of the defaulters are self-employed and/or operate businesses in the informal economy; hence, it’s not possible to trace their income via the normal repayment mechanism.
Ethuro pointed out that the KRA’s digital data and financial monitoring would help pinpoint the borrowers who were earning yet not servicing their loans. However, he reiterated that the planned partnership was meant to encourage borrowers to honour repayment and not to intimidate or send people to jail.
“This is not about intimidation or sending people to jail. It is about making sure those who benefited from the loans play their part so that future students can also access funding,” he stated.
This is in light of the already-existing partnership between HELB and KRA in the formal economy where employees must pay their loans directly from their salaries via deduction.
HELB has also taken steps to enforce the rules on institutions and employers who don’t adhere to the rules and has introduced fines to employers who don’t provide the information and make the necessary deductions.
The repayment difficulties notwithstanding, Ethuro explained that the board has seen improvements in recovery of loans thanks to collaboration between employers and the use of digital finance technology. According to Ethuro, the outstanding HELB loans amount to Ksh20 billion.