BRD does not have information on how much is paid, who paid it, and the outstanding balance.
Rwanda is losing billions of francs in student loans due to loopholes in the laws and procedures that govern loan disbursement and recovery that lead to high rates of default, Rwanda Today has learned.
For example, while the government allocates at least Rwf50 billion every year to student loans, figures by the Auditor General in his 2019/2020 report show the Development Bank of Rwanda (BRD), which currently manages the student loan scheme, is recovering only approximately Rwf 2.3 billion annually well below its target of Rwf 9.9 billion.
While BRD did not respond to our requests for comment by press time, the Auditor General blames it for lacking effective recovery mechanisms without some former beneficiaries saying the repayment process is not clear.
Official figures show BRD has issued at least Rwf36 billion in student loans every year for the past five years while only Rwf11 billion has been recovered.
According to the Auditor General, BRD does not have information on how much is paid, who paid it, and the outstanding balance compared to the total loan.
Vivian Kamuhanda and Elyse Kubwimana who received at least Rwf 2.4 million annually in tuition fees each for three years and have since graduated (2017), say they are not aware of how much they owe the government. “... I do not know how much I owe, whether there is any interest or not, or where to get that information. If there was a follow-up strategy, I would probably be committed to paying back but none is even talking about it,” Mr Kubwimana told Rwanda Today.
Mr Kubwimana’s experience is shared by several graduates who benefited from the loan scheme who spoke to Rwanda Today. In addition to non-existent follow-up and identifying information, the report also pointed out the lack of legal provisions or regulations to overlook the process of issuing and student loan recovery.
For example, while the Law Nº 44/2015 of 14/09/2015 governing student loans and bursaries was supposed to be complemented by presidential and ministerial orders determining who will be the recipient, procedures of granting the loans and interest to be applied while paying back, the orders were never issued.
The above loopholes have been exploited by thousands of students who are reluctant to pay back loans voluntarily.
Yves Emmmauel Turatsinze, a lawyer and lecturer at the School of Law at the University of Rwanda, explained to Rwanda Today that when a published law lacks implementing orders for a long period, implementation becomes an issue.
"It is not only the law governing study loans and bursaries, we have numerous laws that were published in the official gazette years ago without matching implementing orders. When that is the case, it is easy to take advantage of loopholes even when there are sanctions in the law because the law is incomplete," Mr Turatsinze said.
He blamed bureaucracy for delays in implementing orders, adding that parties in charge do not prioritise such orders. "Ideally, laws and related implementing orders should be published simultaneously to allow implementation and efficiency. It is impossible to push for adherence when the law is incomplete," he said. Yet when the government transferred the tertiary education financing scheme from Rwanda Education Board to BRD in 2015, the goal was to turn it into a self-sustaining institution by 2025.
Approximately Rwf29 billion per year was allocated to cater for study loans and Rwf645 million for capital expenditures for the first year. In the plan then, recoveries would serve as a revolving fund with BRD targetting to recover at least Rwf9.9 billion per year so that the scheme could become self-sustainable in 10 years.
The government has spent an average annual budget of Rwf36.9 billion for study loans compared to Rwf29 billion that were planned.
From January 2016 to December 2020, BRD disbursed Rwf184.6 billion of study loans and bursaries to students in higher learning institutions in Rwanda and abroad.
The law stipulates that an employee shall inform the employer of study loan payment within seven days of their hire date. The employer shall inform BRD within the same period of time. Failure to comply with the procedure imposes a fine of 10 percent paid by either the employer or employee.