Determinants of loan recovery in a student financing organization: case of Higher education loans board
The financing of higher education in Kenya has been a big challenge to the Government of Kenya, through Higher Education Loans Board (HELB - hereafter referred to as the Board). There is a growing student population, rising costs of education and an increased dependency by students on financial assistance due to the slow growth in the economy and the impact of poverty levels in the country. This is to be seen against the background of dwindling finances from the Government, who have been the main financers of higher education. The Board has recognized key challenges that it must into account in its operations. These challenges include the need for HELB to mobilize funds and become a self-sustaining organization in the long term; increasing demand for loans by Kenyan students, particularly from private and self sponsored students; the need to maximize the recovery of nonperforming loans by entering into strategic partnerships, which would assist in the netting in of loanees; and the need to reduce the loan default rates. Altemative methods of raising funds urgently need to be looked into by the Board. Secondly, the Board has to deal with the problem of non performing loans which now stands at 45% of the outstanding loans. Ways have to be found to find effective ways of reducing the loan repayment default rate. The use of threats and/or incentives to increase long repayment could be the key. Lessons drawn from the banking industry in Kenya can also be used to reduce the loan default rate and the level of non performing loans. The strategies used by the banks to reduce these figures can be replicated by HELB. The Project is therefore an exploratory research on the Determinants of the Higher Education Loans Board loan recovery program.