Debt relief for cash-strapped public universities

Kenya’s public universities could benefit from debt relief to help them cope with pressing financial pressures and save them from imminent shutdown. This follows a push by the Universities Fund (UF) – the agency that manages the financing of public universities on behalf of the government – to have the debts renegotiated to ease repayment obligations.

This is among the raft of new proposals made by the agency to the Education Cabinet Secretary Ezekiel Machogu which, if adopted, will also enhance income-generation within the universities and nearly double state subsidies. This is in a bid to save cash-strapped universities and lift the country’s faltering higher education credentials.

UF Chief Executive Officer Geoffrey Monari says the government has to come up with a debt management strategy to guide universities out of unsustainable debts, something which most of the public institutions are grappling with. This route will include negotiating a payment plan with creditors for the existing loans.

Data from the agency shows pending bills for universities stood at US$466 million in June 2022, which includes outstanding statutory deductions.

Secondly, the agency is seeking a restructure of the current business enterprises in public universities to help them efficiently generate more revenues to supplement government subsidies.

This said, the agency would also include the government’s setting aside a quota on its procurement to public universities.

Monari said at least 50% of consultancies procured by government and state corporations should be ring-fenced for universities to compete among themselves to promote local content and participation.

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Thirdly, the fund is pushing the national Treasury to consider increasing the provision of the differentiated unit cost (DUC) for funding universities from the current 48.11% to 80%. This means that, under the current model, based on the unit cost for each course or programme, the government is supposed to take care of 80% of the tuition fees for students in public universities, but it’s only covering 48.11%, which should be increased, according to some experts.

“This will adequately resource programmes offered in universities while keeping the impending crisis at bay and allowing the sector to seek out other ways to finally reform the status of financing universities in Kenya,” Monari told the media.

Continuous cuts in funding

This proposal is likely to face opposition, however, as the government seems bent on further cutting the DUC allocation to the institutions.

Kenya has already effected a further cut in funding to public universities for the financial year which kicked off in July 2022. The national Treasury, in a budget statement for the current fiscal period, said it had allocated US$793 million from the US$1.003 billion allocated last year, a 20% cut.

public universities
Kenya’s public universities could benefit from debt relief to help them cope with pressing financial pressures

The universities had requested US$1.8 billion from the government in their budget plans. Public universities rely largely on government subsidies to run their operations.

In another proposal, the funding agency also wants young universities given priority in the allocation of infrastructure funds from the government, to lift their capacity.

The proposals by UF are critical as the agency is mandated to advise the education cabinet secretary in matters of university education financing and developing a fair and transparent criterion for allocation of funds to universities.

The agency is also charged with apportioning funds to universities; establishing the maximum Differentiated Unit Cost for the programmes offered and to mobilise and receive funds from the government, donors and any other sources.

“However, if the additional funding is not available due to other national priorities, the government has three options; increase fees (which is not advisable given the current economic situation), support only needy students based on the economic situation of each household, and, thirdly, admit students as per the available funds,” Monari told the Business Daily, a Kenyan business title, on 12 November.

Grave concern over crisis

Educationists are worried that, if left unattended, the current state of public universities could degenerate into a major crisis which could lead to closure of the institutions.

“It’s a dire situation. If something is not done urgently, we are likely to close down some universities. Our collective bargaining agreements cannot be implemented.

“As we speak now, some are not paying full salaries while others are paying their staff very late. This is affecting our members who have other bills to settle,” said Onesmus Mutio, the organising secretary of the Universities Academic Staff Union, or UASU.

The biting shortfall in funding has seen most of the institutions struggle to remain afloat as the amount allocated by the government is not adequate to meet their expenditures amid higher student enrolments.

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As a result of the escalating crisis, most of the universities are unable to meet their financial obligations. Kenyatta University, Kenya’s largest by student numbers, has, for example, not settled October salaries for the teachers, citing cash flow challenges.

Lecturers at Egerton University are also faced with delayed salaries. Moi University announced in July that it will declare a number of its workforce redundant in a bid to reduce its wage bill and stay afloat.

Last month, UF wrote to the World Bank seeking a US$20 million bailout to support operations in state universities.

On 2 November University World News reported that Kenya was looking to lock students from wealthy families out of state-funded university learning in a bid to reduce the unbearable burden of subsidised education.

UF said it would conduct an audit of all new and existing students to ensure that only those from needy backgrounds accessed state funding.

This conservative approach will also be extended to the Higher Education Loans Board, the agency that disburses state loans to students, meaning that the facilities will not be accessible to students who have the means to study.

The new model is largely meant to help slash state subsidies in public universities at a time when the government is struggling to fund its obligations – the result of a harsh economic environment and pressing loan repayments.

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