Finance

Kenya: Banking sector reports $103.6mln in outstanding student loans

Thursday, 03 December 2020 15:48
Kenya: Banking sector reports $103.6mln in outstanding student loans

(Ecofin Agency) - In Kenya, defaults on loans taken out by students to finance their university education increased again in the first 10 months of the year. According to local media, which quote document presented by the Parliament, 38,314 former students who benefited from such loans did not repay them over the period reviewed.  

By the end of October 2020, 116,642 people had defaulted on their student loans. This situation is indicative of the difficulty ex-students experience after their higher education studies.

For those who have been employed, the strong assumption is that the current situation does not allow them to earn enough money to meet their repayment commitments. And for those who have gone into entrepreneurship, the economic situation does not seem to allow them to make sufficient margins.

Overall, KSh11.3 billion ($103.6 million) is now considered bad debt out of a total student loan portfolio of KSh45.5 billion currently outstanding with financial institutions. This gives a default rate of 28.5%, which is higher than the 13.5% default rate for the country's banking sector as a whole.

The current situation seems to be analyzed exclusively through the prism of covid-19 which has forced the limitation of activities in the country. But as is the case in many countries where student loans exist, the cause of the problem seems to be deeper.

The evolution of the world of work means that long studies no longer guarantee a decent and well-paid job. This makes it difficult to repay the loan taken out.

Idriss Linge



 
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