A study loan beneficiary who fails to repay their loan on time, will pay a late payment interest of 1.5 per cent of the due amount for each month of late payment according to a ministerial order released last week.

The study loan which is managed by Development Bank of Rwanda (BRD) is given to a learner to pay the cost of education and related needs at a higher education level in Rwanda or abroad.

In order to recover the loan, the employer is supposed to declare to the financial institution, within a period of 15 days from the date of appointment of the employee who has benefited from the study loan by using a prescribed declaration form.

When an employer fails to declare or to repay the study loan on time, the ministerial order says, the financial institution sends a written notification requesting them to repay the study loan together with an administrative fine and late payment interest in a period not exceeding 15 calendar days from its reception.

A study loan beneficiary who does not inform their employer that he or she studied on a study loan for it to be deducted from his or her salary, or who fails to declare or to repay the study loan on time when he or she is a self-employed worker or works abroad or works with diplomatic institutions operating in Rwanda, without justified reasons is liable to an administrative fine of 10 per cent of the due amount.

An employer who does not declare, or deduct the amount for study loan repayments from the salary of the employee who studied on a study loan, or who deducts it but does not pay it on time is liable to an administrative fine of 10 per cent of the due amount.

Establishing a database of employees who benefitted from university students’ loan schemes is at 90 percent according to BRD.

By mid-last year, the bank had recovered only Rwf24.4 billion out of the total disbursement of Rwf221.85 billion.

The number of loan beneficiaries was 139,925 whereas only 18,626 had paid back the loan, which represents just 13.3 per cent.

Interest rates

"A study loan beneficiary repays it with a simple interest calculated only once on the total loan amount received," it says.

It includes 11 per cent for undergraduate students and 12 per cent for postgraduate students.

"Interest on a study loan is calculated during the signing of a study loan agreement. However, the final total amount of interest is determined by the financial institution at the end of the agreement,” it says.

The study loan beneficiary has to repay it through a deduction from the employee’s salary by the employer, direct repayment by the beneficiary and voluntary repayment by a learner during studies.

An employer repays the employee’s study loan by deducting 8 per cent of his or her monthly gross salary, from the time the employee was appointed.

However, a student loan beneficiary willing to repay more than 8 per cent of his or her monthly gross salary, signs a payment contract with the financial institution, the order explained.

It clarifies that if a loan beneficiary is a self-employed worker or works abroad or works with diplomatic institutions operating in Rwanda, he or she repays the loan according to different arrangements after signing a repayment commitment plan with the financial institution.

For loan amounts not exceeding Rwf2.5 million, the repayment duration cannot exceed two years, and repayment may be done on monthly or quarterly instalments.

For loan amounts ranging from Rwf2.5 million to Rwf5 million, the repayment duration cannot exceed three years, and repayment may be done on monthly or quarterly installments.

With the loan amount ranging from Rwf5 million to Rwf7.5 million , the repayment duration cannot exceed five years, and repayment may be done on monthly or quarterly instalments while for loan amount ranging from Rwf7.5 million to Rwf10 million, the repayment duration cannot exceed six years, and repayment may be done on monthly or quarterly instalments.

It says that for loan amount ranging from Rwf10 million to Rwf15 million the repayment duration cannot exceed seven years, and repayment may be done on monthly or quarterly instalments while for loan amount ranging from Rwf15 million to Rwf18 million, the repayment duration cannot exceed eight years, and repayment may be done on monthly or quarterly instalments.

For loan amounts exceeding Rwf18 million, the new ministerial orders says , the repayment duration cannot exceed 10 years, and repayment may be done on monthly or quarterly instalments.

The loan beneficiary may also decide to repay the loan once or in instalments.

"A learner who wants to start repaying his or her study loan while still studying agrees with the financial institution on repayment arrangements. Study loan repayment by a learner still studying does not stop his or her study loan unless agreed with the financial institution,” the order explains.