Role of banks in financing student loans

By Jacob Mosenda

Dar es Salaam. Students lacking financial muscle to cater for education in universities or vocational and technical colleges can realise their dreams through financial support from domestic financial institutions, it has been stated.

The possibility comes if local banks decide to join hands with the government’s efforts aimed at providing low interest loans to the needy students.

Recently, the government disclosed a plan to expand higher education loans disbursement to students in technical colleges.

The move is seen as crucial for growth of the sector and reduction of youth unemployment in the country.

The ministry of Education, Science and Technology said loans disbursement has been extended to technical education students starting with diploma programmes that secure the much needed skills in the employment market possibly from the 2023/24 academic year.

The agreement is that reaching that time, funds should be available for technical education students, including from other sources, to enable many students in the mid-level institutions to benefit.

Interesting as it sounds, the recent development meets a great concern from economists about the HESLB’s ability to continue funding students at the same capacity when important charges such as Value Retention Fee and 10 percent penalty for defaulters have been waived.

However, in the HESLB sustainability special report published by The Citizen last week, the government was categorical that higher education students’ fund will be sustainable considering underlined strategies to improve the scheme’s performance.

Since then, the government has increasingly encouraged stakeholders including commercial banks to increase the level of funding young Tanzanians to enable them to benefit from the country’s education while at the same time ensuring education is sustainable.

But, experts believe that local banks can flex their muscles to students in technical institutions, while at the same time the HESLB funding sustainability can be realised through scholarships and low interest loans to students, parents or guardians.

Of the local commercial banks, NMB Bank Plc has already shown the way by allocating Sh200 billion at a nine percent interest loan (cheap loan) to students in the 2022/23 academic year.

Following the decision, the Ministry of Education, Science and Technology has encouraged beneficiaries, parents and guardians to take advantage of the opportunity.

“You can borrow to educate yourself, your son or the child you are raising in higher education including technical colleges in this country,” says Prof Adolf Mkenda, the docket’s minister.

“I would like to call on other banks to support President Samia Suluhu Hassan who has increased funds allocations for higher education student’s loans,” he added, while commending NMB Bank Plc.

According to him, their support should be made considering that the Head of State has scrapped fees associated with the loans that were an obstacle for many students to benefit.

According to him, the bank has also allocated funds to provide scholarships to 100 students with special needs, noting that every student will be given a laptop.

Apart from NMB Bank Plc, Vodacom has also been giving scholarships as well as opportunities to 50 top performers in science subjects at the University of Dar es Salaam (UDSM).

The number of students joining universities in the country has increased from 44,715 in 2012/13 to 100,620 students in 2021/22, which is equivalent to 125 percent.

The growth of the higher education sub-sector is due to the large investments that have been made by the public and private sectors in various areas of teaching, learning and infrastructure.

“In terms of financing higher education, we have witnessed the government’s increase in the scope the loans provision with the aim of enabling more students to meet learning costs in higher education,” said Prime Minister Kassim Majaliwa.

Mr Majaliwa made the remarks during the opening of the 17th higher education, science and technology exhibitions, noting that a total of Sh5.32 trillion has been disbursed in terms of loans from 2005/06 academic year to 2021/22. He said President Hassan’s goal was to keep increasing the number of students accessing higher education loans to 488,000 reaching 2025/26.

In order to achieve this, he noted that the government has continued to look for different financing sources by involving development stakeholders and financial institutions.

“We are calling on other institutions to support this initiative and dish in more funds in the sector to enable many Tanzanians to have the opportunity of joining universities and technical college studies,” he said.

What experts believe

In Tanzania, higher education has become very expensive at a time when the lives of many households keep deteriorating due to different factors.

Many educational institutions follow diverse fee structures, therefore without building strong and sustainable capacity that will complement the government’s efforts, many students will miss the opportunities to pursue higher education studies.

“Let’s assume all banks in the country decide to allocate Sh200 billion like NMB Bank Plc and grant scholarships to best performing students taking courses of great importance for the nation such as science and technology,” says economic and development consultant, Dr Judith Mmari by phone, questioning where would the country be in the next ten years.

The expert says what is needed is real cooperation between the government and financial institutions with the aim of creating a win-win situation.

“HESLB cannot be burdened if there are cheap loans from the banks. This will help to ensure that the number of students who come from wealthy families demanding loans from the institution will decrease,” he says.

Prof Abdul Mohamed of the State University of Zanzibar (Suza) suggests that enough education should be provided to Tanzanians to enable them to understand that the less they can get the loan and support for their children, the better children from poor families can be served.

“The government is aware that the private sector can play a great role in bringing development to the country’s education. That is why it has started with the banks,” he said.

He emphasised that Tanzanians should be informed that this is an opportunity that should be fully exploited for the benefit of their children.