Wednesday February 12 2014

Without a good strategy, student loan scheme will not help Uganda

By Okodan Akwap

By assenting to the student loan scheme, President Museveni has pressed in the hands of Education Minister Jessica Alupo, a very challenging assignment: To implement a good policy in a society staggering under the heavy weight of corruption, incompetence and sectarianism.
There are a couple of factors that will make Alupo’s assignment similar to tight-rope walking.

First, the Shs5 billion reportedly set aside by Finance minister Maria Kiwanuka to start the loan scheme, is a drop in the ocean. Once the costs for administration and other complex logistics are taken care of, how much of this money will actually be available for disbursement?
With too many students chasing too little money, claims of sectarianism in the allocation of loans could emerge.

Second, Alupo must be wary of the ghosts of entandikwa, an equally well-meaning credit scheme President Museveni launched some 19 years ago. The scheme collapsed – taking down with it billions of shillings – due to corruption among its implementers and failure by most recipients to repay the money partly because of the “Gavumenti etuyambe” (Government should help us) mindset.
Alupo must strive to ensure that the technical team appointed to put in place a proper mechanism for disbursement and recovery of the loans must comprise competent individuals. They must be knowledgeable in the complex aspects such as customer relationship management, systems design and application, capture of borrowers’ data and electronic content management.
The team will need time – six months is too short – to adequately sensitise loan borrowers and their parents, guardians or sponsors on how to comply with the relevant law and regulations. Repayment plans must be specific and penalties for defaulting must also be clearly spelled out.
In their 2011 paper, “Student Loan Policies in Korea: Evolution, Opportunities and Challenges,” published in the Educational Research Journal, Vol. 26, No, 1, Hee Kyung Hong and Jae-Eun Chae, provide a general idea of what a good student loans strategy should look like.

They note that a key strategy to increase access to higher education in many countries has been to implement a student loans scheme as a means of sharing the costs involved in the expansion of higher education.
In this sense, they argue, student loans transfer higher education costs from a significant reliance on governments and taxpayers to parents and students, based on the rationale that greater equity in access to higher education is achieved through the user-pay system.

Hong and Chae, therefore, reckon that when students and parents assume the costs of higher education through tuition fees, the government can spend the excess funding resulting from this shift in cost burden on financial aid to needy students. In this way, student loans have the potential to reform financial efficiency and accessibility of higher education.
Here, the phrase “aid to needy students” appears to be a more plausible and acceptable basis for student loans than the potentially discriminatory pronouncements by some Education Ministry officials who seem to be rooting for students doing science courses.

According to Hong and Chae, two basic forms of student loans have existed for many years in advanced economies such as USA, UK and Australia.
First, there is the conventional mortgage-type loan, which is characterided by fixed interest rate and repayment period. Then there is the income-contingent type, which requires an obligation to commit a fixed proportion of the borrower’s future earnings until the loan is repaid.
Now, what do Alupo and the technocrats under her have in mind, given the reality of inequitable access to quality education in this country and in other parts of the world?

“Trends in Global Higher Education: Tracking an Academic Revolution”, a report prepared for the Unesco 2009 World Conference on Higher Education, shows how inequality in higher education is perpetuated.
It notes that inequality within countries has increased in the past several decades because the academic world has always been characterised by “centres” and “peripheries.”
The strongest universities are seen as centres. Thus, limited resources, including student loans, will always find their way to “centres of excellence” such as Makerere University.

Yet the report shows that private higher education institutions, many of them for-profit or quasi for-profit, represent the fastest-growing sector worldwide. It cites Indonesia, Japan, the Philippines and South Korea as some of the countries with over 70 per cent private enrollment.
What this report tells us is that Uganda should stop concentrating financial assistance to only students in public universities because the future lies in private universities.
Hong and Chae’s paper gives clear clues on why South Korea, which was at a comparable level of economic development with Uganda a mere five or so decades ago, has practically reached for the sky while we remain in a state of backwardness.

It tells us that South Korea’s participation rate in higher education saw an unprecedented growth from under 6 per cent to 70.4 per cent between 1960 and 2009. This growth spurt of higher education, we are further told, has been especially apparent in the 1990s, when higher education assumed a strategic role in advancing the country towards a knowledge-based economy.
In his speeches, lately, President Museveni emphasises knowledge as the fifth factor of production after capital, labour, land and entrepreneurship. Let’s walk the talk, Mr President.

South Korea’s notable march towards a knowledge-based economy was made possible by increasing the role of the private sector in higher education and by minimising government funding, so say Hong and Chae.
Undoubtedly, the student loan policy is long overdue. However, we should remember that in several instances, good policy has proved easier formulated than implemented in Uganda.

It is mainly for this reason that we have had similar policies such as the 1995 entandikwa scheme veering off-course and falling into a bottomless pit along with sorely needed financial resources that would have made a significant difference in our country’s efforts at poverty reduction through income-generating activities.
This time around, we must have a solid strategy to ensure that the student loan scheme will be successfully sustained through carefully-planned short to long-term phases to spur socio-economic transformation in our society.
Otherwise, be prepared to write off some more billions of shillings of tax-payers’ money.

Mr Akwap is a lecturer at Kampala International University.