Defaulters of study loan scheme face harsh penalties

Friday July 07 2023

The government has intensified recovery of study loan from defaulters through a Ministerial Order. Picture: File

By Ange Iliza

Nearly 50,000 beneficiaries of student loans scheme are facing legal fines, along with their employers, as a new Ministerial order came into effect.

The order states that beneficiaries of students loans scheme and living allowances while studying in Rwanda or abroad will be subjected to a 10 percent fine, while their employers will face a penalty of 1.5 percent of the amount due.

According to the Development Bank of Rwanda (BRD), a total of Rwf272 billion have been disbursed to students pursuing higher education both within the country and overseas since 2016.

However, during the past six years, only RwF21 billion have been successfully recovered. Out of the 92,000 students who benefited from study loans, 24,000 have fulfilled their repayment obligations.

The government has been providing loans to students since 1980, although the available data from the BRD captures data from 2016. Regardless of the timeframe, the bank emphasizes that all beneficiaries from government loans for their studies are now subject to the imposed fines.

“After BRD inspects non-compliant institutions/beneficiaries a written notification is established, and this notification has the value of an enforcement order.


However, when an employer or a study loan beneficiary who is a self-employed or works abroad or works with diplomatic institutions operating in Rwanda expresses willingness to repay after receiving the notification, he or she may request to repay in installments,” the order reads in part.

Beneficiaries of BRD’s study loans say the payment process is not understood by many and the follow-up is insufficient, making it difficult for those who want to pay.

“I have the study debt but as we speak, I don't even know how much I owe, payment options, or who to speak to if I wanted to pay. It has been almost 10 years, and none has ever followed up,” said Edith Berwa who graduated in 2014 after studying for four years on government assistance.

There are complaints that even those who have decided to start paying back the loan, have experienced continued deductions from their banks even after they completed the payment.

The bank, however, says it established the BRD “Minuza” platform to allow beneficiaries to follow up for themselves. The platform has been functional since January 2023 but the uptake and usage for paying back the loans remain low.

The bank has resorted to using a mobile money account to which people would start paying back student loans. Wilson Rurangwa, head of Education Portfolio Management at BRD says the bank will increasingly invest in loan recovery initiatives to avoid loss-making initiatives.

“It's crucial to understand that the implementation of the "Education for All" program would be hard if our government paid for every student's tuition and living costs without them paying back. We actively contribute to developing resilience and sustainability by aiding the government in this endeavor,” Mr Rurangwa said.