Loan recovery: Private and informal sectors lagging behind, says HESLB

Dar es Salaam. Despite expressing a positive response to the recovery of higher education loans from some employers and beneficiaries, the Higher Education Student Loans Board (HESLB) still struggles to recover loans from the private and informal sector.

The private and informal sectors are the biggest employers of graduates from various levels of education, including beneficiaries of higher education loans, according to experts.

However, the sector still contributed to the repayment of loans by only 42 percent, compared to the public sector which contributed by 58 percent.

In a meeting with some employers in Dar es Salaam aimed at recognizing them for the best responsibility of repaying the loans of their employees, HESLB revealed that since it started making major systemic, operational and management improvements, they have been able to recover about Sh1.4 trillion.

This, they said, was from the total investment of Sh6.59 trillion from 1994 to 2023.

“There is an amount of Sh300 billion that should have been recovered from the informal and private sector, but it has not yet been returned even though there is a great improvement in the annual return,” said Mr Abdul-Razaq Badru, HESLB executive director.

One of the biggest challenges reported is the difficulty of recovery in the private and informal sectors as well as the violation of the HESLB law governing the recovery of higher education loans.

All employers should notify HESLB about new employers, deduct 15 percent of the loan beneficiaries and submit to HESLB within 15 days of the coming month after HESLB analysing and submitting the credentials of the beneficiary to the employer.

The requirement is as a result of the amendments on the HESLB Act of 2004 in 2017 that required employers to deduct the 15 percent from loan beneficiaries’ gross salaries.

According to the law, employers who fail to deduct salary to loan beneficiary and not submitting to HESLB within the scheduled period will be charged 10 percent of the amount of monthly deduction.

Likewise, a graduate who is self-employed in the informal sector must start repaying the loan two years after graduation by repaying from Sh100,000 for graduates who are self-employed.

“Obeying the law for employers is a very important thing. That is why we believe that employers are very important stakeholders of the government to ensure that all beneficiaries return the money to fund other needy students,” said Badru.

“That’s why those we have called here have shown compliance that we would like to see all other employers and self-employees come forward without waiting for wasted time in court for not complying,” he added.

According to HESLB as of April, 2023 a total of Sh141.3 billion equal to 72.5 percent of the target for 2022/2023 of Sh195 billion has been collected, believing that if all employers in the private sector decide to follow the law and comply then speed up of the existing recovery will be doubled.

The board has come up with ICT strategies to facilitate the collection and repayment of loans such as Loanees Individual Permanent Account (LIPA), a special account for the beneficiary to get information about his/her debt.

Others are Employers Portal (ePO), a special account for the employer to submit/get information about employees owed and make payments. Refund Portal (REPO), a special account for the beneficiary to request the refund of money deducted by mistake and Compliance Portal (COPO), a special account for charges and penalties for violations of the law.