“You must pay back when you finish and get a job; otherwise, we will come to where you are working and arrest you for defaulting and being a bad borrower,” Museveni said.
Three days before Museveni formally launched the scheme, Education Minister Jessica Alupo had voiced similar concerns.
“The loan scheme will benefit only Ugandan children, who have registered to get national identity cards. If the beneficiaries fail to pay back, there will be penalties. We shall punish them accordingly,” Alupo said.
Also known as the Higher Education Students Financing Scheme, it is intended to help Ugandan students who have qualified for higher education but are unable to support themselves financially. The essence is to increase access to education where a large number of students who have performed well cannot raise school fees for themselves.
The ministry has created a revolving fund where when the students begin paying back, the funds accumulate so more can gain access. Currently, government pays only for 4,000 students, who perform best in A-level exams out of 47,000 admitted to universities in 2013. This means that 91 per cent of university students are self-sponsored.
At Makerere University alone, 25 per cent of the students who were admitted in 2013 did not sit for first-year final exams after failing to pay tuition fees. The gross enrolment ratio (the total enrolment as percentage of all those that qualify) in higher education stands at 5.7 per cent, which is the lowest in East Africa despite the country having some of the best universities in Africa.
Yet research has shown that for some countries to register economic growth, gross enrolment rate should be above 40 per cent.
“The student loan scheme is, therefore, intended to address the above lacuna by availing financial assistance to the needy students. Private students who pay fees have not reduced the demand on government financing of higher education institutions,” Alupo said.
There are 32 licensed universities, of which only six are public universities. The loan to students will cater for tuition fees, functional fees, research aids and appliances for students with disabilities. It will not cater for accommodation and feeding.
The first beneficiaries will be students pursuing undergraduate science courses like medicine, engineering, and agriculture. Museveni said government would provide Shs 6bn in the 2014/2015 budget but this money would increase every year.
“I have been supporting so many students in my office like Luweero children, and children from northern Uganda and Karamoja. You have been hearing of the state house scholarship. We want to phase that one out because it was free money, it was a grant.
The figure had gone up to Shs 30bn a year,” Museveni revealed. “The students we took on, once they finish, we will not take on more and that money will be added to the student loan scheme. Initially we will start with science students. Do not worry; we will also support students of arts.”
He said the student loan scheme was the apex of government’s education funding plan for the poor following the universal primary (UPE) and secondary (USE) education schemes.
“I first experimented in Kisozi because whenever I would go there I would be besieged by children asking for school fees.
So, I said what does it require to provide free education?
“If I build the classrooms, teacher’s houses and the library and put textbooks, why can’t the children study free. They only need to bring their lunch, buy uniform and books. That’s how we started UPE,” Museveni said. “We have been having a tug of war because some of the teachers want to charge [some money]. But what if the parents cannot manage to pay?”
Pupil enrolment in primary school jumped from 2.5 million to eight million, an addition of five million children, who were initially sitting at home because they could not afford school fees.
Before USE, there were only 161,000 children attaining secondary level education. Today, the number has increased to 1.2 million.
Alupo acknowledged that the scheme had been long in coming. The delay was attributed to Parliament’s delay in passing the Education Loan Scheme bill. The bill is similar to the Students’ Loan Scheme Act passed in Tanzania in 2005. The Tanzanian act led to the creation of the Higher Education Students Loan Board to manage the scheme.
Uganda’s version is called the Higher Education Students Financing Board (HESFB), headed by Prof Callisto Locheng, a lecturer in philosophy at Alokulum Major Seminary in Gulu. Alupo urged the board to be transparent in their work, as it involved lifting Ugandans out of poverty.
The nine-member board will serve for four years, renewable once. The scheme is anticipated as an incentive for poor students to take up the expensive science courses with an initial 1,000 beneficiaries. Alupo added that in the long run, the ministry would marshal up Shs 20bn in extra funds, to raise the number of beneficiaries to 5,000 students.
Key in supporting the scheme is the ability of beneficiaries to start paying back one year after graduating. Beneficiaries will first be sensitized and interviewed to ease their willingness to repay. But it should be remembered that Ugandans generally consider government loans as grants and never pay back as the case was with Naads funding.
In case of death or permanent disability, Alupo says, the losses will be covered by the interest rates on loans paid back by other students. Just like here in Uganda, this is a major concern in Tanzania and Ghana, which run similar schemes.
In Tanzania, for example, the scheme came under parliamentary scrutiny when it was discovered that most students were not repaying their loans. While the government had issued close to TShs 300bn (about Shs 445bn) between 1994, when the scheme was launched, and 2009/10, only TShs 3bn (about Shs 4bn) had been repaid.
The arguments advanced in defence of the beneficiaries included failure to secure jobs after graduation. However, even in Ghana, where most beneficiaries were able to secure jobs, the scheme still registered higher levels of default, leading to calls for a reconsideration of other options.
Some private institutions moved ahead of the government to bridge the problem of funding higher education. Kampala International University has been managing a scheme in partnership with Orient bank since September 2009. Under the scheme, students from all KIU campuses and all East African countries are offered loans at two per cent annual interest.
A student can apply for a maximum of Shs 6m, not exceeding the tuition cover for two semesters. However, the loan has to be repaid within a year, in two installments. The repayment rate is rated as fair, as students are under pressure to clear debts, before they can access their exam results.
In South Africa, the condition for accessing a loan is strict with one requiring a guardian or parent to sign surety for beneficiary. The guardian is required to complete the loan repayment incase the beneficiary defaults. Museveni also toured exhibitions by Kyambogo University students in engineering, agriculture, architecture, art and design, pottery and sports science.
“I’m even happier today because I saw the products of your work, machines, food technology, and agricultural inputs. You should know that the government is doing everything possible to support education. Don’t only stop at learning and making those items here, when you graduate, we want to support you so that you manufacture those products yourselves.
You can form groups of scientists, I know you have knowledge but you don’t have money. The government each year puts aside Shs 50bn for science innovation. Anybody who has got a good idea, we support it by giving him a grant. In future we can make it an interest free revolving fund. We also have Shs 300bn for research,” Museveni