Rwandan students will no longer apply for scholarship loans from the government; rather, through the Development Bank of Rwanda (BRD).
Education Minister, Silas Lwakabamba, said that this will increase the number of loans issued and enable the recovering of Rwf82 billion issued since 1980.
Only Rwf10 billion has been recovered, the rest, says Peter Rwambala, the Director of Corporate Affairs at BRD, “will be cleared within the next six years.”
“We have been doing business which is not ours,” adds Minister Lwakabamba.
Now, a student, with a guarantor, will sign a contract with the bank for tuition, living allowances, research, and travel allowances for those studying abroad, at an interest rate of 11%.
After getting employed, a student will then begin paying the loan, but the government will not be involved in the recovery process.
Françoise Uwimana, a student at University of Rwanda says the new arrangement is good since the bank will not ask for collateral and will always make timely payment.
However, her worry is “some of us may lose right to scholarship as it was the case five years ago when other reforms were introduced.”
She then suggests, “Transparency should prevail.”
Beneficiaries will recover the money within 15 years. If a student receives Rwf 5million, he will have to pay Rwf 36,600 per month, to clear the loan (Rwf 5,490,000).
Rwambala told KTPress that the bank will try to limit non-performing loans to at least 5%.
This development comes as a solution to a problem that has existed for decades.
For example, funds have been coming from the finance ministry to the central bank, and then to the account of the Ministry of Education, which sends it to their respective colleges’ accounts before it is transferred to students’ accounts.
This chain makes a student get the loan after three months.
On April 12, students addressed the matter to President Paul Kagame, who was prompted to order Minister Lwakabamba to solve the issue immediately.
Two days later, a cabinet meeting chaired by President Kagame, approved that effective September this year, all students will have to apply for a loan at BRD and end the misery.
Before 2008, all students who would meet the pass mark were automatically awarded a full scholarship. Since then, with the number of students having increased from 3,000 to 87,000 today, the government, citing budget constraints, requested parents to share the burden.
Students were then classified according to level of wealth of their families. Category 1 and 2 get a flat Rwf 600,000 ($850, then $1000) per year, plus a monthly stipend of Rwf25, 000 ($35). Category 3 and 4 are entitled half of the scholarship loan. No support to category 5.
With this development, Minister Lwakabamba said, the government will be depositing 100% of its offer into the bank; Rwf 29 billion ($40 million) for local students, and Rwf11 billion ($15 million) for students studying abroad, every year for 10 years.
After then, Lwakabamba said, the bank “will handle it and sustain it.”