High Court Orders HELB To Stop Charging Its Beneficiaries Large Fines

The Higher Education Loans Board (HELB) has been ordered by the High Court to stop charging its beneficiaries interest and penalties over the principle sum.

This comes in response to a lawsuit filed by Ann Mugure, Davis Nguthu, and Wangui Wachira, three HELB beneficiaries, who sought to have the lending body’s decision to charge interest and penalties on their non-performing loans overturned.

The three claimed in court papers that they had taken out loans from the board to pay for their undergraduate degrees, but that they had struggled to repay because of the outrageous interest rates and penalties.

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 ruling, Justice Alfred Mabeya termed unconstitutional the imposition of interest and penalties on 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.
For example, Mugure borrowed Ksh.82,980 in July 2004 at a 2 percent interest rate, and by July 2016, the debt had grown to Ksh.540,464.

In contrast, Nguthu borrowed Ksh146,090 in July 2016; however, by March 2021, it had increased to Ksh335,207.
By February 2021, Wachira’s loan of Ksh. 135,000, which he received in July 2016, had grown to Ksh. 336,573.

Recently, HELB has pushed loan recipients to pay back their debt so that additional students can use the service.

The board’s most recent inducement, given in March of this year in light of the COVID-19 pandemic’s impact on the economy, was a full waiver of penalties.

The waiver, known as “Kamilisha Malipo Ya HELB,” was originally planned to last from March 1 to April 30, but it was eventually extended to June 30.

According to HELB data, there are currently 94,216 loan accounts in default, down from the 109,661 recorded in February.

Meanwhile, there are astonishing Ksh. 10.2 billion in unpaid loans.
Loan repayments of 870 million shillings were made by 9,998 beneficiaries in 2018, compared to 10,110 beneficiaries who received a 100% waiver in 2013 and paid off 1.3 billion shillings in total.