Law on student loans could pose challenges to employers - experts

A proposed law that seeks to govern students’ bursaries and loans in post-secondary education and ease recovery process ‘unfairly put the onus to pay back the loans on employers,’ experts have said. The legislation, which was unanimously passed by the Lower Chamber of Parliament on Tuesday, enables the Government to channel university student loans through a bank and set up mechanisms to ensure that beneficiaries who have completed their education pay back upon getting jobs. But experts have criticised the law’s provision requiring employers to declare in writing any employee who has a loan to repay to the financial institution or be penalised for not doing so. Article 17 of the draft law requires beneficiary employees who have loans to repay to notify their employers of pending debt and intentions to repay through salary deductions. The employers would then declare in writing any employee who has the loan to repay to the financial institution in a period “not exceeding one week” from the date the employee started work and then deduct the dues and pay them to the financial institution. There are penalties for employers who will not report their employees to the financial institution. Some Parliamentarians resisted this while passing the law on Tuesday and some legal experts also argue that it could be unlawful. Under Article 24 of the law, “in case the employer does not declare to the financial institution the loan beneficiary after their employment, the employer shall be punishable by a monthly penalty of 10 per cent of the loan the employee would have repaid.” Kigali-based lawyer François Xavier Habakurama said the employer has been unfairly included in the process to recover the loans. He explained that it should concern two entities; the student who has the obligation to pay back the loan and the financial institution which has the responsibility to recover the funds invested in the financial product. Legally speaking, Habakurama said, “there is no sounding purpose to involve the employer” in accordance with Law no. 13/2009 of 27/5/2009 regulating Labour in Rwanda or a competent authority in accordance with Law no 86/2013 of 11/09/2013 establishing the general statutes for public service in the process of recovering. “The obligations of the employer should not go beyond the provisions of Article 47 of Law no 13/2009 of 27/5/2009 regulating labour in Rwanda. So it is not fair to punish someone for non-execution of a contract for which he/she hadn’t been party in its contracting step,” he said. Habakurama thus puts the onus to recover the loans on both the students and the financial institution, instead of forcing the employer to notify the financial institution about employees who owe it money. “The Financial institution (creditor) has to establish all means and systems for recovering the funds on one hand but on the other side the debtor has to update the creditor for executing the contract made but a big role has to be played by the creditor,” he said. The chairman of the Private Sector Federation, Benjamin Gasamagera, told The New Times that asking employers to declare their employees who owe money to the government and penalising them for not doing so would be both unfair and unfeasible. “It’s not fair at all. How will employers verify that their employees owe money in case they decide to conceal it? Another issue is the bureaucracy that goes with that, and employers, especially business people, would be too busy for that verification. Much as every Rwandan would want to support that arrangement at the moment, its feasibility is not guaranteed,” he said. However, Blaise Uhagaze, the secretary general of the Association of Rwanda Insurers, said the arrangement could be feasible if the Government designs clear instructions that go with its implementation. “When instructions are clear, it is possible to programme it and implement it,” he said. Some MPs against the provision During parliamentary sessions to pass the law on study bursaries and loans held on Monday and Tuesday, it was clear that some Members of Parliament were against putting the responsibility to recover study loans on employers. MP Théodomir Niyonsenga was concerned that forcing employers to declare their employees to the financial institution may prove too difficult and too expensive to implement and may force some of them to discriminate when hiring students who will graduate on government loans. “How come a third party was brought in the process to recover the loan? This third party - this employer - should only be required to implement the students’ will in terms of deducting the money to be sent to the bank, not to report the student to the bank,” Niyonsenga said. The MP said it will be a matter of days before the Government realises that asking the employers to report their employees to the financial institution and penalising those who fail to do it is not practical. MP Juvenal Nkusi agreed with Niyonsenga and suggested that employers be kept out of the process to recover students’ loans if it is to succeed. “The law did not separate the obligations very well. Let the onus to pay be on students, not the employers. The law should prioritise the power of a contract between the students and the banks. It’s not practical to involve the employers,” Nkusi said during discussions on the law in Parliament. Following its unanimous passing by the Chamber of Deputies on Tuesday, the Bill governing bursaries and loans granted to students will be sent to the President’s Office for assent. editorial@newtimes.co.rw

News

Law on student loans could pose challenges to employers - experts