Yustus Aribariho, a co-Founder at Furaha, says that with the best strategy, dropping out of school due to finance, can greatly be mitigated if schools, and the financial industry join efforts, adding that schools also need stable revenues to perform.
Uganda’s education system dictates that tuition fees are paid for every term of three months, or in a lump sum for the full year, however, financial challenges make it hard for some parents or guardians to meet this.
With most parents/guardians not having guaranteed stable or regular revenue streams, borrowing becomes a necessity.
Commercial banks, microfinance institutions and micro-lending financial technology (fintech) firms have various products for lending.
However, school fees being short term and yet constant expense till the child completes education, means that lenders prefer to give short-term credits, which may also be handy for the client.
The challenge is that short-term credit products, especially micro-loans, come with high interest rates for a short period, making a payment within three months a challenge.
Microloans by telecom companies and banks carry interest rates ranging from 9.5 to 15 percent per month.
FURAHA, a fintech company that targets education financing in Africa says with only about 10 percent of children enrolled in Primary One being able to complete Senior Six, it has been found that lack of ability to pay fees in time is the major problem.
Yustus Aribariho, a co-founder at FURAHA, says Uganda and Africa at large have the highest concentrations of children failing to complete school because of a lack of proper financing mechanisms.
He adds that the global education funding gap, according to UNICEF is 90 billion dollars, with Africa accounting for 70 percent, but that this is because financial institutions have failed to evolve in their operations.
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FURAHA has partnered with platforms like MoMopay of MTN and PegPay of Pegasus to make lending for tuition easier and convenient but also cheaper, with a loan being at 5 percent per month.
The Money is paid directly into the school’s fees bank account, making it a safer option protected from losses or misuse.
Aribariho says that the best strategy, dropping out of school due to finance, can greatly be mitigated if schools and the financial industry join efforts, adding that schools also need stable revenues to perform.
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Banks and other lenders put the school fees and other short loan products at high interest rates claiming that it is because they are risky.
However, Ronald Azairwe, CEO of Pegasus Technologies Limited, says it is the design of the products that makes it either risky or not, while how the lender acquired the cash to on-lend also determines the risk levels.
According to him, partnerships between banks and payment platforms is one way of easing the risk, and he adds that the product must be convenient for parents or borrowers.
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FURAHA Chief Executive Officer, Denis Musinguzi, says processing a school fees loan and having the money banked into the school fees account takes just a few minutes because they already have data of the borrower.
This data, which is primarily provided by the National Identity Card, makes it easy to verify one’s creditworthiness, instead of requiring the filling of forms and writing letters of recommendation, as has been the case with traditional banks.
Ian Fernandes, another co-Founder also urged for collaboration between different sectors if they have to realise financial inclusivity agendas, adding that no single company can manage or sustain the journey alone.
