The High Court has stopped the Higher Education Loans Board (HELB) from imposing interests and penalties on its beneficiaries that are beyond the principal amount.
This follows a petition by three HELB beneficiaries; Ann Mugure, Davis Nguthu and Wangui Wachira, who moved to court to challenge the loan body’s decision to impose the interest and penalties on their non-performing loans.
According to court documents, the three said they borrowed loans from the board to fund their undergraduate studies, but the exorbitant interests and penalties had made their ability to repay difficult.
The trio told the court that on November 19, 2020, HELB threatened to publish the names and photos of defaulters in local dailies, issuing a 30-day ultimatum.
In his ruling, Justice Alfred Mabeya termed unconstitutional the imposition of interest and penalties on the non-performing loans.
“A declaration hereby issues against the respondent (Helb) that by imposing interest amounts and penalties or fines that exceed the principal amount, the respondent is in contravention of Article 43 (1) (e) and (f) and Article 27 of the Constitution of Kenya,” he stated.
Mugure, for instance, borrowed Ksh.82,980 in July 2004 at an interest rate of 2 percent and by July, 2016, the debt had accumulated to Ksh.540,464.
On the other hand, Nguthu borrowed Ksh.146,090 in July 2016 and by March 2021, it shot up to Ksh.335,207. Wachira’s Ksh.135,000 loan which he got in July 2016 had accumulated to Ksh.336,573 by February 2021.
HELB has lately been encouraging loanees to repay their loans to allow the facility to benefit other students.
The latest incentive was a 100 percent penalty waiver which the board gave in March this year against the backdrop of the COVID-19 pandemic’s effect on the economy.
Dubbed ‘Kamilisha Malipo Ya HELB’, the waiver was initially scheduled to run from March 1 to April 30, but was later extended to June 30.
HELB data shows that loan accounts in default currently stand at 94,216, down from the 109,661 recorded by February,
Unpaid loans meanwhile stand at a staggering Ksh.10.2 billion.
In 2013, the loans board also offered a 100 percent waiver to 10,110 beneficiaries who paid off 1.3 billion shillings while in 2018, the exercise resulted in loan repayments totaling 870 million shillings from 9,998 beneficiaries.