Education Institutions were first closed on 18th March, 2020 when President Yoweri Museveni announced a national lockdown in a bid to curb the spread of the Covid-19 virus. This directly impacted 73,240 preprimary, primary, secondary, tertiary and higher institutions with 15.12 million learners and 548,182 teachers.
The Executive Director of Uganda Bankers’
Association (UBA), Wilbrod Humphreys Owor says that the total direct school
loan portfolio is currently 1.3 trillion Shillings and this includes
institutional and personal loans and the accumulated interest.
He adds that their records also indicate another 600
billion debt under private sector institutions that support schools and hostels that this brings the education sector portfolio to 2 trillion
Owor on Wednesday appeared before Parliament’s Education
Committee in regard to the effects of the COVID-19 pandemic on the education
sector and measures to address them.
Education Institutions were first closed on 18th
March, 2020 when President Yoweri Kaguta Museveni announced a national lockdown in a
bid to curb the spread of the Covid-19 virus. This directly impacted 73,240
preprimary, primary, secondary, tertiary and higher institutions with 15.12
million learners and 548,182 teachers.
These numbers don’t include supporting non-teaching
staff, estimated over 300,000 and businesses that support the supply chain of
educational institutions. This closure of close of 2 years has left several
loans acquired by schools from banks unpaid with accumulated interest.
Now recently, President Museveni said that Primary
and Secondary schools would re-open in January 2022 after 4.8 million people in
priority and vulnerable groups are fully vaccinated including teachers and
330,000 students aged 18 years and above.
“The exposure is big, of course the schools are
closed and there are no cash flows to repay the loans,” said Owor.
Owor proposed to the committee on the Education Sector
Recovery Fund which he said is long-term in nature to spread the loans and give
entities long time between 8 to 15 years to repay their loans.
He says that the Fund can operate under Bank of
Uganda (BoU) and that not only the Education Sector needs it but it will also cushion
the financial institutions carrying the
non-performing loans which is a threat to their capital.
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Owor said that money for the Fund can be sourced
from World Bank, International Monetary Bank (IMF) and others. He disagreed
with a statement by the Minister of Finance, Matia Kasaija urging private
school owners to sell school assets to repay bank loans instead of asking
government for bail outs.
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Meanwhile, UBA has effective 1st October
approved different accommodations or support for the education sector portfolio
for the next 12 months ending December 2022 and these include a waiver of early
repayment fee clauses which could potentially curtail the ability of their
customers to pay off loans using other sources of income available.
Owor also noted a waiver of any other penalty
related clauses in the loan contracts due to inability to meet loan obligations
in a timely manner as per loan terms, no further accruing of interest on unpaid
interest on the restructured portfolio and there will be discounting interest
rates charges for only the restructured education sector portfolio effective 1st
January, 2022 by between 10% to 25%.
Owor says that this discount will vary depending on the
He added that the accommodation will also be
extended to staff of private education institutions for salary-based loans they
acquired prior to lock down and that the Supervised Financial Institutions
(SFIs) will support educational institutions once opened in January 2022 not
only in the area of debt management but also with any other working capital
needs including towards meeting of Standard Operating Procedures (SOPs).
“The accommodations are premised on Bank of Uganda
providing the necessary communication instrument or circular to anchor this accommodation
where allowing Supervised Financial Institutions (SFIs) to maintain the same
loan classification status and to suspend write-off of these loans for 12
months effective January 2022 when schools open,” reads part of the documents
presented by UBA to the committee.
Kalungu West MP, Joseph Ssewungu wondered why the
Bankers’ Association did not immediately stop interest of loans for schools
last year when parliament passed a resolution to do so.
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Jonam County MP, Emmanuel Ongiertho also questioned
whether the school loans were insured and what discussions are being held on
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Kibale County MP, Cuthbert Abigaba Mirembe also
wondered how helpful the new waiver provided by the Bankers’ Association is to
schools given that a lot of loan interest has accumulated in the last two
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In response, Owor said that banks did not stop
charging interest when parliament directed so since they are regulated by Bank
of Uganda which provides restructure frameworks.
“At no time, did the credit relief measures by the
Central Bank indicate a halt on the levy of interest. It said, provide
restructures and capitalize interest,” Owor explained.
In regard to insurance, Owor said that it can only
come in after all recovery measures have been exhausted.
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Abigaba, the Education Committee Vice Chairperson
insisted that the new relief measures by UBA are not a relief because the damage
already caused is bigger. He accused the officials of riding behind directives
of the Central Bank not to stop interest on school loans.