When Development Bank of Rwanda (BRD) shed off its commercial business arm to Atlas Mara group to concentrate more on development finance, its work was not cut out for it as would have been expected. Instead, it found itself the custodian of a task that had caused a few headaches in some government agencies; student loans. When the Government streamlined scholarship management to give more people access to higher education, it created a specialised agency; the Student Financing Agency for Rwanda (SFAR). Its sole role was to award educational loans and oversee their recovery. It seemed a straight-forward affair, but SFAR was overwhelmed to the hilt and was forced to fold up. The task was given to Rwanda Education Board (REB). The same problems encountered by SFAR were nearly the same as the predecessor’s; the loans and their recovery needed a financial institution framework to manage it; it was not just a government institution – so in came in BRD. Even though things have improved, loan recovery is still a challenge and it needs urgent attention. The whole logic of the timely recovery of the loans is to give more people access to education, so defaulting or delay in repayment causes a negative ripple effect in student financing. BRD has introduced the Education Finance Management Information System (EFMIS) to deal with the issue, but it will need more than just that; it needs boots on the ground to recover the loans, especially from the private sector. But recovery should be done in a manner not to cause more problems than the loans came to solve. Like any banking transactions, there should be favourable payment terms and regular updates on the status of the loans so as to avoid paying more.
