The Development Bank of Rwanda (BRD) has intensified its efforts to recover scholarship loans from over 50,000 beneficiaries.
Fred Mugisha, senior manager in charge of education loan department at BRD told KT Press that 12,500 out of 50,000 loan beneficiaries have already started paying.
“The response is still low because so far only 500 institutions have responded,” Mugisha said adding that the bank has contacted over 1000 companies which are employing some of the beneficiaries.
The bank targets to recover Rwf 80 billion within the next five years as the country seeks to collect enough money for education fund.
In the first half of 2016, the bank has collected over Rwf 830 million. The bank started loan recovery process in January, 2015 after taking over scholarship disbursement and recovery from government.
Previously Scholarships were managed by Rwanda Education Board (REB) but had accumulated arrears. Between 1983 and 2015, the non-performing loans for the scheme had reached 90 percent.
According to government, Rwanda Education Board (REB) lacked professional skills to manage scholarship scheme and decided to hand its management to Development Bank of Rwanda for professional handling.
The bank expects to recover 80% of the total government student loans in the next five years, which once achieved, will rank Rwanda as the first in Africa to achieve the highest number of student loan recovery ahead of Kenya which has achieved about 65%.
According to the law (2015), every year the government must deposit Rwf29 billion on the BRD’s account until the fund will be self-sustainable, ten years later.
A large part of this money is deposited on schools’ accounts to cover students’ tuition (Rwf 600,000 per student annually).
The rest covers monthly living allowances (Rwf 25,000 per student) which is to be disbursed to individual students’ account.
Another Rwf 10 billion is also sent to international universities and Rwandan embassies to cover tuition and living allowances, and transport back home. to 900 Rwandan students abroad.
To get a scholarship from BRD, a student signs a contract with the bank committing to recover the loan within 4 years after starting work. The money will be recovered with 11% interest rate, which is the lowest in Rwanda.
BRD now is compiling lists of beneficiaries to create data base that eases in tracing them, an effort that has painted optimism in the recovery process.
“We want to have data base of all beneficiaries. One of our challenges was lack of data on some of beneficiaries,” Mugisha said adding that it is the students’ obligation to pay back.
Despite tracing beneficiaries to companies where they work, Mugisha says some have been approaching the bank to repay the loan, which he says is a good gesture but still at low levels.
“I graduated in 2013 but did not get a job until 2015 when I started my small business. With my little earning, I want to meet the bank and discuss repayment terms,” a beneficiary who completed accounting at University of Rwanda told KT Press.