CAG flags weak loan recovery, rising HESLB’s dependence on government funding

In actual terms, the government’s contribution nearly doubled, jumping from Sh255.62 billion to Sh469.67 billion, an increase of 84 percent.

In contrast, recoveries from past beneficiaries have been on a downward trend, dropping by 7 percent from Sh190.72 billion to Sh176.61 billion during the same period.

This mismatch between recoveries and demand has pushed HESLB to rely more heavily on the Treasury, raising concerns about the long-term viability of the fund.

The CAG report attributes this rising dependence to weak loan recovery efforts, ineffective income-generating investments by the Board, and a growing number of needy students applying for financial aid.

“Unforeseen reductions in government funding could significantly impact HESLB’s ability to provide loans and meet student needs,” the report warns.

To address this, the CAG recommends that the Board urgently devise alternative sources of funding and strengthen loan repayment strategies.

“HESLB should ensure establishment of strategies on alternative sources of funds that will assist in generation of funds, which ultimately will reduce the dependence of the Board on government support,” the CAG advised.

Despite the concerns, HESLB has in recent years introduced various initiatives aimed at improving loan recovery and ensuring the sustainability of its revolving fund.

In September 2024, the Board formed strategic partnerships with institutions such as the National Identification Authority (NIDA), the Registration, Insolvency and Trusteeship Agency (RITA), and CreditINFO Tanzania Ltd to enhance data sharing and improve defaulter tracking, particularly among those working in the informal sector.

In addition, the #Fichua campaign launched in June 2024 encouraged the public to report beneficiaries who had not commenced loan repayment.

Targeting 50,000 defaulters, the campaign aimed to recover Sh200 billion by August 2024.

However, the move attracted criticism over data privacy concerns, although HESLB insisted the initiative adhered to the law.

Digital transformation has also played a significant role in loan management.

Tools such as the Student’s Individual Permanent Account (SIPA), the Digital Disbursement Solution (DiDiS), the Employer Portal (EPO), and the Loanees Individual Payment Account (LIPA) have helped streamline disbursement, tracking, and repayments.

Moreover, HESLB has entered into collaborations with commercial banks, such as NMB Bank, to offer student loans at lower interest rates.

This is aimed at widening access and reducing the repayment burden on students, offering a model for future partnerships in public financing.

Yet, past policy decisions have also impacted repayment behaviours.

One notable example is the removal of the 10 percent penalty for loan defaulters—a measure that many experts argue has encouraged a culture of delay and non-payment.

“As long as there are no serious consequences for defaulting, the incentive to repay is weakened. We need a balanced approach that’s firm but fair,” said a higher education analyst Prof Eunice Kyando

Alongside funding challenges, the report also raised red flags over the declining enrolment rates in higher learning institutions.

The CAG found that enrolment targets were missed by a staggering 69 percent in the 2023/24 academic year—a significant drop from the 31 percent shortfall recorded the previous year.

Out of 113,574 eligible applicants, only 79,133—equivalent to 70 percent—were allocated loans, locking out tens of thousands of students who met the criteria but could not secure funding.

Shortages of qualified academic staff, inadequate infrastructure, and outdated learning tools were cited as key factors behind the enrollment shortfall.

A lack of demand for some academic programmes also contributed to the failure to attract and retain students.

Experts warn that this persistent under-enrolment poses a serious threat to Tanzania’s development ambitions.

“The lower the number of students in universities, the smaller the talent pool we have for future growth,” said education economist Mr Abdallah Mkumbo.

“We are far behind countries like Kenya and South Africa in terms of university enrolment rates.”

According to UNESCO data, Tanzania’s gross tertiary enrolment ratio stood at just 4.2 percent in 2022, compared to Kenya’s 11.7 percent and South Africa’s 22.4 percent.

The global average is 38 percent, showing how far the country needs to go.

The CAG recommends that higher learning institutions improve infrastructure and increase academic staffing to meet enrolment goals.

It also urges the government to expand HESLB’s funding base to ensure more students are supported.