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Education finance a formidable challenge

14th December 2009; Monitor Online by Steven Tendo

Lack of finance is the leading cause of drop outs from institutions of higher learning. Every year, hundreds of students fall out due to failure to raise tuition fees, which has prompted government to embark on an education finance scheme to assuage the problem.

Despite having several doubters, the officialdom is determined to facilitate the education of needy students beginning next year.

Last September, Education Minister Namirembe Bitamazire announced that government has earmarked Shs250 million as seed money to kick-start a loan scheme for university students. “Demand (for the programme) has been on board for some years,” she said. “Now we will be in a position to help students to access funds.”

Students are expected to pay back this money on completion of their studies. And therein lies the problem. Banks, which are the alternative source of finance are not comfortable with the idea of lending to students who have not guarantee that they will pay back.

The Financial Institutions Act, 2004, states that where the collection of the debt in full is highly questionable or improbable, such a facility should not be provided. Bank of Uganda actually penalises banks which offer such money.
Possibilities remain
But education financing is not impossible. Many institutions have put up money to support needy students. Bodies like Kulika and Aga Khan Foundation have been noted as charity organisations that have made a difference in the lives of many Ugandans. “Without that scholarship, I tell you, I would not have finished,” Ms Annet Nabukenya, a Makerere University graduate who benefited from Madhvani Foundation’s annual bursaries.

The difference between a lending institution and these organisations is obviously in the fact that one wants its money back in monetary terms and the other wants payment in other forms. Donor organisations frequently request beneficiaries to give back to their alumni.

New avenues
Another avenue that has recently opened up is where the universities link up with banks. Recently, Kampala International University and Orient Bank entered a partnership in which students can get short-term loans.

The only requirement, according to the scheme, is that all students are East African citizens and hold a student’s saving account with Orient Bank.
“KIU and Orient Bank are taking a risk, but it is a calculated risk full of honour and promise,” KIU Chancellor George Kanyeihamba said in September.

Education finance is also impeded by the absence of national identity cards and a social security system. For some time now, local banks have been running children’s savings accounts, which in reality are glamorised forms of educations trusts. Parents are given the chance to save for their children’s’ education from an early age. In this case, it would not be free money, per se, but the beneficiaries would not have to fret about paying back in future.

Crane Bank runs a free children’s account, like a number of banks in Uganda. The target is children between 0-18 years and the emphasis is on saving for the future.

Other banks with a similar account include Bank of Africa and the Housing Finance Company of Uganda. Bank of Africa’s School Fees Account enables parents to open an account and regularly deposit money. Further, the bank can pay fees directly to the school’s account when a parent wants the fees to be transferred. Barclay’s Bank’s Junior Eagle Account is also tailored to children’s needs.