HELB has come up with an innovative way to curb incidences where beneficiaries evade repaying their student loans. It has partnered up with various banks including KCB Group, National Bank, Jamii Bora Bank, NIC Bank, Family, Equity and Chase Bank, in an initiative that will see HELB disburse loan to students via pre-paid electronic cards. Using this electronic card or smart card, HELB will be better able to trace all the future bank transactions of the loan beneficiaries.
This card is designed to work on a tap-and-go system of payment using the Near Field Communication technology.
This enables HELB to overcome the challenge of growing incidences of students misusing the money meant for school fees by going on a drinking spree or purchasing items such as smartphones, laptops, designer outfits or home theatre systems.
“The card has e-wallets (such as) tuition, upkeep, books and stationery. Therefore, money meant for school fees cannot be spent for any other purpose,” HELB Chief Executive, Charles Ringera.
HELB intends to instill prudent use of the student loans by ensuring students can only access those funds to use for the purchase that only concerns their studies.
The smartcard will also help the students in building their financial profiles, by taking into account their repayment records.
“We (also) want to start building the student credit history which will help the student as they build their credit scores for purposes of future borrowings from financial institutions.”
It will go a long way in ensuring that beneficiaries pay their students loans promptly in order to have a good credit score thus being able to access future loan from other financial institutions for other purposes apart from education. HELB currently has 75,498 loan defaulters who owe the organization about Sh.8.3 billion (US$101 million). Other measures HELB has taken to ensure the loan payment include prescribing hefty fines on the defaulters, hiring debt collectors and prosecutors to recover the loans and prosecute the defaulters.
The smartcard is also a faster, cheaper and convenient method to disburse the loans to the students rather than the bank transfers which have proven to be costly and with too much paperwork over the years.
“Rather than sending bulk payments to universities which must be reconciled later, the cash is carried by the students using plastic money.” HELB is running the prototype of this new technology in partnership with Family Bank and sQuid a London-based payment firm. The pilot program is being run at the Kenya Methodist University (KeMu) where the students are being issued with a smartcard dubbed sQuid campus card.
The sQuid campus cards allow KeMu students to receive their HELB loans fast and direct to their e-wallet. They can withdraw the money through any Family Bank ATMs and pay for books, accommodation, meals, photocopying services and other items around the campus by simply tapping the sQuid campus cards at any point of sale terminals around the campus. KCB Group is also running the same prototype project at Egerton University.
This year HELB has disbursed about Sh.5.4 billion (US$66 million) to about 125,000 students countrywide, from which local banks stand to cash in huge profit, in the form of commissions and fees they’ll charge to process those loans.
This electronic card initiative is without a doubt a new milestone achievement for HELB in making its activities more efficient and costs effective. It also goes a long way in encouraging loan repayments.