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Cash crunch hits SLB

Loans bureau has $2.5-billion disbursement gap

BY BALFORD HENRY Observer senior reporter balfordh@jamaicaobserver.com

Thursday, October 04, 2012    

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THE Government’s Students’ Loan Bureau (SLB) is facing a “significant challenge” in meeting the projected $4.2 billion in disbursements to tertiary institutions this year.

According to SLB Executive Director Monica Brown, only $1.7 billion or 41 per cent of the projected $4.2-billion disbursement has been identified, leaving a gap of $2.5 billion. The bureau, she said, has been talking with financial institutions with the hope of securing funds to close the gap.

The disclosure was made at yesterday’s meeting of Parliament’s Public Administration and Appropriations Committee (PAAC), chaired by Opposition MP Edmund Bartlett.

Opposition spokesman on finance and PAAC member, Audley Shaw, urged the Government to seek funding from multilateral institutions like the World Bank, the Inter-American Development Bank and the European Union, noting that there was “no sharp policy difference” between Government and Opposition on the funding issue.

The SLB produced figures to show a projected 16,600 loan applications for 2012/2013 academic year, up from 13,600 last year, with disbursements projected at 14,000 this year, compared to 12,100 last year.

Brown said that with the exponential increases in demand and associated increases in tuition costs, the sustainability of the revolving fund was dependent on periodic capital injections as loan funding was not a viable option.

She explained that the SLB has total outstanding debt of approximately $2.2 billion, including loans from the PetroCaribe Development Fund and the Caribbean Development Bank (CDB).

The CDB has indicated that the increasing demand for SLB loans was being fuelled by the Government’s reduction in subvention to tertiary institutions, and the institutions’ increased tuition charges. The CDB said that in addition to the increased demand for loans, the SLB’s current loan model cannot be sustained without significant annual increases in capital.

The bank also noted that demands for tuition disbursements were growing faster than annual collections.

The CDB findings were corroborated by a report from the actuaries, as well as a study conducted by PriceWaterhouseCoopers on the Bureau’s current business model, which said the SLB was faced with a crisis of its own viability. The challenge, it added, required key policy decisions which could only be addressed by the Government in consultation with various stakeholders.

The SLB has been providing student loan financing for qualified and needy Jamaican students since 1970. It was made a statutory body in 1971, providing loans from a revolving scheme and students are required to repay at the end of their course of study. However, it has a high rate of delinquency, and has resorted to the publication of photographs of delinquents who have failed to make good on their payments after several other measures to try and collect.

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