Tanzania: Govt Abolishes HESLB’s 6% VRF

IT is all smiles for recipients of higher education loans following the government decision to scrap 6 per cent value retention fee (VRF) that has been charged annually by Higher Education Students Loans Board (HESLB) on the outstanding loan balance.

President Samia Suluhu Hassan who graced the Workers’ Day that was celebrated at national level in Mwanza said the government has decided to scrap the 6 per cent retention fee after considering workers’ concerns.

“The VRF was among the things I was planning to look into, but after a lot of complaints, I have decided to remove it today, therefore I am ordering HESLB to remove the fee from today, we will only deduct 15 per cent of beneficiaries’ monthly pay,” she said.

However, the Head of State urged loan beneficiaries to continue repaying loans and commended HESLB for recording good performance in collecting debts, saying the amount has increased from 28bn/- in 2015/2016 to 192bn / – in 2019/2020.

She said proper and timely collection of loans has led to the increase of loan budget from 373bn/ – in 2014/15 to 464bn/ – in 2020/2021, and that the number of beneficiaries has increased from 98,300 to 149,389.

HESLB is tasked by its establishing Act, under Section 7(i) to recover all the due loans extended for former students since July 1994 so that the same money could be used to lend other students, thus rendering the loans scheme sustainable and ensuring a revolving fund.

The Board had introduced three charges in 2012/2013, including a six per cent VRF charged annually on the outstanding loan balance, and not the principal loan.

It was introduced to increase the value of loan financing offered to beneficiaries. If a beneficiary fails to repay his/her loan after the expiration of a grace period of 24 months after completion of studies, he/ she shall be charged a 10 per cent penalty.

Earlier, Acting Secretary- General of Trade Union Congress of Tanzania (TUCTA), Mr Said Wamba said the amended HESLB Act, 2016 was a big burden to loan recipients since not all manage to get jobs within 24 months after graduation.

Mr Wamba further said the amendments to Act No. 4 of 2016 are oppressive and unethical and significantly reduce morale and create unnecessary hatred.

“We request the government through experts to amend this law. But what hurts the most is the VRF that increases the debt,” he said.

Moreover, Mr Wamba said poor record keeping has been a big challenge that creates confusion among loan recipients. He said the information available to the employer are inconsistent with the one at HESLB.

“These loans are just nightmares for some workers and meaningless for students from poor families.

We urge the government to pay attention to the advice given in 2019/20 by Controller Auditor General (CAG) report on the deductions that violate the recovery of the Debts Act,” he said.

Last month, the CAG report for 2019/2020 found out that the deductions carried out by HESLB are too high and violate the recovery of the Debts Act.

The CAG review and examination of the payroll and related supporting documents of 10 entities for the financial year 2019/2020 revealed that 112 employees were paid (net pay) less than one-third of their basic salaries.

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