The High Court has barred the Higher Education Loans Board (HELB) from charging its beneficiaries interest and penalties in excess of the principal amount.
This follows a petition filed in court by three HELB beneficiaries, Ann Mugure, Davis Nguthu, and Wangui Wachira, who sought to overturn the loan body’s decision to levy interest and penalties on their non-performing loans.
According to court documents, the three claimed that they borrowed loans from the board to fund their undergraduate studies, but that the exorbitant interest rates and penalties made repayment difficult.
The trio testified before the court that on November 19, 2020, HELB gave a 30-day deadline and threatened to publish the names and pictures of defaulters in local dailies.
In his decision, Justice Alfred Mabeya ruled that the enforcement of interest and penalties on non-performing loans was illegal.
“A declaration hereby issues against the respondent (Helb) that the respondent is in violation of Articles 43(1)(e) and (f) and Article27 of the Constitution of Kenya by imposing interest amounts and penalties or fines that exceed the principal amount,” he said.
For instance, Mugure borrowed Ksh. 82,980 at a 2 per cent interest rate in July 2004. By July 2016, the debt had grown to Ksh. 540,464.
Nguthu, on the other hand, borrowed Ksh.146,090 in July 2016 and it grew to Ksh.335,207 by March 2021. Wachira’s loan of Ksh.135,000, which he received in July 2016, had grown to Ksh.336,573 by February 2021.
HELB has recently encouraged loanees to repay their loans in order for the facility to be available to other students.
The most recent incentive was a 100 percent penalty waiver, which the board granted in March of this year in response to the economic impact of the COVID-19 pandemic.
The waiver, dubbed ‘Kamilisha Malipo Ya HELB,’ was supposed to last from March 1 to April 30, but it was later extended to June 30.
According to HELB data, the number of loan accounts in default currently stands at 94,216, a decrease from the 109,661 recorded in February. Unpaid loans total a whopping Ksh.10.2 billion.
In 2013, the loans board offered a 100 per cent waiver to 10,110 beneficiaries who paid off 1.3 billion shillings, while in 2018, 9,998 beneficiaries made loan repayments totalling 870 million shillings.
