Friday, July 15, 2011


By  from Business Daily 
Friday, July 15 2011

Mr Daniel Adero, a Maseno University graduate, is yet to get gainful employment, two years after he graduated. But Mr Adero, just like thousands of his colleagues who are still looking for jobs, receives an e-mail monthly from the Higher Education Loans Board (Helb) that not only reminds him to start repaying his loan but also informs him of a Sh5,000 fine on top of the interest his loan is attracting per month.
Even though his argument that the education financier should give him time to get a job so that he can start offsetting the debt is shared by most of the defaulters the Business Daily interviewed, the board maintains that once any student completes his/her university education, they should use the knowledge gained to generate some income.
Nevertheless, Mr Adero reckons that the new measures have made it indeed very expensive for a beneficiary of the government loan to continue ignoring repayments. Currently, loanees are required to start repayment a year after completing studies, and the board can shorten the grace period if it finds it fit. For instance, Mr Adero’s fines in the past 10 months are now in excess of Sh50,000, which is eight times more than the Sh8,600 interest his 12 per cent interest rate per annum his loan has attracted in the same period, making the fines emerge as the most effective punitive measure that will push the education financier to overcome its greatest nightmare — recovering loans — as it races towards self-reliance.
According to data from the State corporation established to finance needy university students, more than 76,000 beneficiaries who are due for repayments are yet to commence repayments amounting to Sh7.9 billion, meaning that the financier is netting at least Sh3.8 million in fines alone monthly. Should the board defy the mounting pressure against these fines and continues, as is the case in the developed world, then Helb is sure of a fresh source of quick cash to support its huge demand for loans. For instance in the US, defaulters are penalised up to Sh18,000 ($200) a month if they don’t pay.
The board is also looking to tap into the expertise of professional debt collectors to complement the current services of the Kenya Revenue Authority to track down defaulters of the government university loans in an effort to maintain the growth in its loan recovery now in excess of Sh200 million a month.
“The process of picking the debt collectors is currently on as per the public procurement law, there has been drastic increase of loan payment by individual payers not attached to any employer,” the board’s head of operations, Richard Kipsang told the Business Daily. “We have seen more than 100 per cent increase of collections from this group,” Dr Kipsang said.
Latest figures show that the stringent measures the board has introduced to encourage repayment have started to bear fruit after it reported a 21 per cent growth in loan recovery in its last financial year. It collected Sh2.3 billion in 2010 compared to the Sh1.9 billion the previous year — a 60 per cent of the annual loans disbursement to students ­— while tripling the growth in its individual collections to Sh457 million in the period under review. The growth means that the financier’s revolving fund will be able to cope with reducing Government financing even as it ropes in more students into the scheme.
This year, it is planning to lend Sh4.1 billion to 100,000 students, a 17 per cent growth from the Sh3.5 billion it gave to 76,000 students last year and a 28 per cent rise on the Sh3.2 billion disbursed to 68,500 students in 2009.
The board has also embraced the use of new technology to recover the loans, especially via the mobile money platforms and monthly reminders to defaulters. It has also opened an avenue where one can go and negotiate as much money as they are able to pay a month depending on their income to encourage graduates with unstable contractual engagements, unsalaried or low-paying jobs to also consider repaying.
But it is the dawn of the era of information sharing among lenders on defaulters with the Credit Reference Bureau (CRB) that has handed the board the biggest muscle to deal with its worst nightmare for decades. Information sharing involves circulation of names of defaulters to all lenders, potentially locking them out of the credit market.
The board, which is already sharing information with sister institutions within East Africa and Africa at large through the Association of African Higher Education Financing Agency is now calling on the regulator to increase the scope of information sharing to all lenders including micro-finance institutions and the savings and credit co-operative societies (Saccos).
“We propose that the current legal framework on credit referencing be made more inclusive by including all credit providers in the country. This will enhance accountability and reward those who pay as per the loan agreements,” Dr Kipsang told participants of the regional credit reporting conference early this month last. Currently, information sharing is prominent among commercial banks, leaving out other lenders such as the Saccos and micro lenders.
This comes at a time when the rising cost of living and labour costs have started a clamour for increments in the amount of allocations; a proposal, which if implemented will see the loan advanced to students more than double. Parliament has proposed that the maximum amount allocated per academic year for universities be set at Sh100,000, and the least Sh50,000.
Currently, students who qualify for the loans get between Sh35, 000 and Sh60,000 alongside a bursary of up to Sh8,000 every academic year until they finish their studies. This translates to a minimum of Sh140,000 and maximum of Sh240,000 in four years.
This has seen the board through Higher Education minister Sally Kosgei seek parliamentary support to have its budgetary allocations increased to cater for the increasing number of self-sponsored (parallel) students.
The increased allocation, she said, was meant to include more students into the Helb scheme alongside increasing the disbursement threshold for the students who benefit.
Helb’s extension of its scope of financiers to include all Kenyan students in any university in East Africa, masters and post-graduate students, scholarships to very needy students is also putting it under increasing pressure to ensure it collects its loans. The expanding university population to the current 31 alongside 16 constituent colleges as they seek to satisfy the ever rising demand for tertiary education further exerts pressure on the board as demand for loans increase.
“There is therefore need to enhance loan recovery to be able to create a viable revolving fund to meet this demand for university education,” Dr Kipsang said.
To date 300,000 Kenyans have benefited from financial support from the board at a cost of Sh30 billion in which Sh22.8 billion is mature loans having been disbursed to 212,000 students. Forty-seven thousand students have fully re-paid their loans amounting to Sh3.7 billion whose details have been forwarded to CRB for positive listing.
A consolidated 90,000 beneficiaries are at various levels of servicing their loans, which stand at Sh11 billion.
The board said it is also looking for fresh avenues to push loan beneficiaries to repay their loans.
“The board’s long-term strategy is to become an education savings mobiliser through deposit taking in order to finance students in all tertiary institutions,” said Dr Kipsang. An improved collection will also allow it to increase its allocation to Kenyans studying in East African universities as well as students in the middle-level colleges.
This high demand for university education financing has also attracted commercial banks that are coming up with ways of circumventing challenges posed by this group financing since they lack security — title deeds and other fixed assets — critical to access finance. For example National Bank has a loan product where employed guardians or parents can access loans of up to Sh500,000 through its study loan repayable in 60 months and Kenya Commercial Bank has the Masomo loan product. Insurance companies have also lined up several products targeting parents who want to secure the future of the children’s education.

Wednesday, July 13, 2011


Question. Who is an auctioneer?
An auctioneer is a qualified individual holding a valid auctioneering license issued by the Auctioneers Licensing Board pursuant to the provisions of the Auctioneers Act No. 5 of 1996 Laws of Kenya. An auctioneer's license is strictly issued to an individual and it is not transferable.

Question. Is the auctioneering business rooted in the Law?
Answer. The auctioneers Act No. 5 of 1996 and Rules of 1997 regulate the business of Auctioneering. For a person to perform the duties of an auctioneer he must hold a valid Auctioneers License issued by the Auctioneers Licensing Board pursuant to the provisions of the Auctioneers Act No. 5 of 1996. The Licensing Board based at Milimani commercial courts Nairobi maintains a record of all the licensed auctioneers.

Question. What are the duties of a licensed auctioneer?
Answer.  A licensed auctioneer is authorized under the Auctioneers Act to undertake the following duties
  • To levy Distress for rent against defaulting tenants pursuant to the provisions of the Distress for Rent Act Cap 293 laws of Kenya.
  • To attach for sale any movable or immovable property pursuant to a court order made pursuant to any written law or contract.
  • To repossess property pursuant to any written law or contract.
  • To carry out evictions pursuant to a Court order.
  • To realize charged security
  • To offer for sale any movable or immovable property through public auction or any other mode of sale by competition.
It is a an offence punishable under the Auctioneers Act and the Penal Code for anyone to undertake the above duties in Kenya without a valid Auctioneer's license issued by the Kenya Auctioneers Licensing Board. Only licensed auctioneers are authorized under the law to undertake these tasks. You should always ask to see the identification badge and the current practicing license of the auctioneer you intend to engage and if in any doubt, please always contact the Auctioneer Licensing Board based at Milimani Commercial Courts Nairobi or the Auctioneers Association.

Quetsion. Why should I engage the services of a licensed auctioneer and not any other person?
Answer. A good citizen adheres to the laws of the land. By engaging a licensed auctioneer you are acting within the law. Lately, there has been a trend where the Courts are awarding debtors huge sums of money in form of damages and other reprieves against creditors who engaged unlicensed persons to perform the duties of a licensed auctioneer. Many property sales, realization of securities and repossessions have been reversed / nullified by the courts for this reason alone.

Question. Can an auctioneer enter my property without my authority?
. Yes. A licensed auctioneer is under the law authorized to enter into any property to enforce a court order or instructions from third parties against your property in the course of his duties. An auctioneer may request for police escort where he predicts resistance or intimidation by the debtor or where he has to break any door to gain access to property. This will always be at the expense of the debtor / owner of the property to be executed against.
Question. Is there a code of conduct for auctioneers?
Answer. Yes. All licensed auctioneers are required to follow the laws of Kenya and particularly to carry out their business in accordance with the provisions of the Auctioneers Act No 5 of 1996, Auctioneers Rules 1997 and the Auctioneers Practice Rules of 2009. Auctioneers Practice Rules 2009 outlines the code of conduct for licensed auctioneers.

Question. Who licences court process servers?
Answer. Court process servers are licensed by the process servers committee based in the High Court of Kenya. The process server's license is renewed annually upon payment of the requisite fees. A list of all the licensed process servers for the current year (2011) is readily available and accessible to the public at the Kenya law reports website  
Question. Who pays auctioneer's fees and expenses for auctioneering services?
Answer. The auctioneer's expenses in most cases are to be met by the debtor. However if the debtor cannot be traced, or has no assets upon which execution can be levied, or the proceeds of the sale are not sufficient to cover the charges, then the creditor pays the fees or the shortfall thereof.

Question. At what point is the auctioneer entitled to his fees for an attachment?
Answer. An auctioneer is entitled to his full fees as provided in the scales as soon as he initiates the process of attachment i.e. upon placing attachment notice (proclamation) upon the debtor's assets.

Question. How is the auctioneers fees determined?
Answer. The scale for calculating auctioneer charges is provided for in the Auctioneers Act, fourth schedule Auctioneers Rules 1997. Please visit the official Kenya Law Reports  website where you will be able to browse all the laws of Kenya (Acts of Parliament) including the entire Auctioneers Act and Rules made therefrom complete with the auctioneers fees scale. 

Question. Can an auctioneer carry my goods away without any notice?
No. A licensed auctioneer before carrying away your goods is required under the law to issue, in case of a court warrant, a proclamation notice of seven days and fourteen days for distress for rent cases.

Question. Can I transfer or move the goods comprised in a proclamation notice issued by an auctioneer to unknown place to defeat attachment?
Answer. It is an offence under the auctioneers rules and the Penal code for the debtor or his agents to interfere with any goods comprised in a proclamation before they are redeemed by payment of the amount demanded therein or such lesser amount as the creditor may agree in writing. Upon being proclaimed, the goods come into the custody of the law and the debtor/owner therefore loses control over the goods as long as the attachment stand.

Question? What should I do when an auctioneer come calling?
When an auctioneer visits you, please co-operate and do not panic, his/her actions are well rooted in law. He is only performing his duties as required by the law. An auctioneer must however, identify himself/herself precisely and state the purpose of the visit.

Thursday, July 7, 2011


"Neither a borrower, nor a lender be," cautions Shakespeare in Hamlet. The reality is, most of us carry debt. From a money management standpoint, that is not necessarily bad. Sometimes debt is good. Sometimes it's downright ugly. The key is to carry the right kind of debt, and not too much of it.


Good Debt

Good debt is generally debt that can provide a long-term financial payoff. An educational loan, either for your children or perhaps career education for yourself, is a good example. The improved earning power from the education should more than pay back the cost of the loan.
Mortgage/real estate debt is another "good" debt. To begin with, few consumers can afford to pay cash for a home. Also, a mortgage is good debt in the sense that a home is considered an investment, as most homes will appreciate in value over time.
Debt for business growth, expansion or working capital is also “good” debt especially for established businesses; the same cannot be said about financing a startup with debt.


Bad Debt

This tends to be short-term debt in which the loan lasts longer than the item you bought with the debt, and for which there is no financial payback. Most credit card debt falls into this category. People pay for everything from dinner to toys to clothing to vacations on their credit card and they're still paying for them long after the vacation is done or the toy is broken. Also, credit card debt tends to be very expensive-18 percent or more is common.
Loans for furniture, appliances, cars and other personal needs also can be fairly expensive, though usually not as high as credit cards. Save for these items, whenever possible, and pay for them in cash.


Ugly Debt

Some people would lump credit cards in this category especially in this part of the world. But I reserved this category for the really expensive debt that comes from what's commonly called "fringe banking." This includes "payday loans," interest on pawned household items and furniture (Shylocks). Interest rates for some of these loans can run 25 percent to 200 percent or more.

Monday, July 4, 2011


On the 11th of April 2011, the Central Bank of Kenya (CBK) granted a licence to Metropol CRB to offer banking sector credit information sharing services in Kenya. Metropol Credit Reference Bureau Ltd, which is a wholly-owned Kenyan company, is the second licensed credit reference bureau in Kenya after CRB Africa Ltd which was licensed in February 2010. The licence has been granted pursuant to the Banking (Credit Reference Bureau) Regulations, 2008 which empower the Central Bank of Kenya to licence and supervise credit reference bureaus (CRBs) in Kenya. CRBs facilitate information sharing among institutions licensed under the Banking Act. The licensing of Metropol CRB is expected to enhance competition in the credit information sharing market. This will lead to increased choice for banks and product variety. Customers will also have more options in accessing their credit reports.

April 2011 - Usage of the CIS Mechanism amongst Lenders & Borrowers

Since the roll out of credit information sharing in July 2010, commendable progress has been made so far with banks having already submitted over 760,000 records to date. Banks have also started accessing credit reports from the licensed bureau for credit appraisal purposes. Since August 2010, banks have accessed 442,128 reports from CRB Africa. The monthly average number of credit reports accessed by banks currently stands at 63,161. On their part, customers have accessed 865 reports since the rollout of the credit information sharing mechanism. It is noteworthy that individuals are eligible to access one free credit report per year from licensed credit reference bureaus.