Stanbic Bank follows Bank of Uganda lead for schools to bounce backJuuko said supporting the education sector is a national imperative and as a business it is 100% bankable when it comes to loans.
Stanbic Bank is providing financial solutions to buttress the education sector as learners settle back into classes after nearly two years of schools being closed. This was one of the counter-measures directed by the government to limit the spread of the Covid-19 pandemic.
At a recently held virtual forum titled ‘Bank of Uganda address on credit relief measures for school loans’, Anne Juuko, the Stanbic Bank Chief Executive, said the bank’s support to the education sector starts with its purpose ‘Uganda is Our Home, we drive Her Growth’. She said “There is no way you can drive economic growth without enhancing human capital development. The education sector as a business is 100% bankable. Let’s understand your unique circumstances so we can help you.”
The forum was organized by Stanbic Bank and Proprietors of Private Educational Institutions’ Association in Uganda’. Soon after schools reopened in January, Stanbic Bank announced the immediate availability of UGX60 billion in hugely discounted ‘booster financing’ to the education sector.
About 50 representatives of private schools attended. Juuko said, in times like these, ethos like trust, transparency, openness and integrity are key to growing businesses.
Under the discounted booster finance, schools are able to borrow up to UGX500 million in collateral-free (unsecured) loans. Parents can also access up to UGX250 million in unsecured loans processed digitally and dispersed within five minutes at zero processing fee. The bank further revealed that its decision to waive all 2021 unpaid accumulated interest on loans to privately owned schools is a proactive initiative based on the understanding that schools have not been earning and that they need to be supported to regain their ability to settle their liabilities.
Stanbic Bank has reduced the cost of borrowing to between 16%-19% for most of its customers mainly to support their economic recovery. Juuko also said, the bank has in place insurance policies and urged school proprietors to consider taking them up to mitigate future business risks. She also urged private school owners to take keen interest in Bank of Uganda’s credit relief measures that are available for the private sector.
Bank of Uganda (BoU) announced a number of credit relief measures in November last year running up to 12 months to 30the September, 2022. It said, supervised financial institutions are permitted to grant one restructuring to credit exposures in the education sector which is adversely affected by the pandemic. The BoU said, the restructuring maybe in the form of a repayment moratorium, extension of tenure, reduction of principle loan repayment installment, reduction of applicable interest rate or a combination of all the above.
Tumubweine Twinemanzi, the Executive Director Supervision at BoU clarified on these measures. He said, in the event of any restructuring being granted, it will not be treated as an adverse change in the credit risk profile of the borrower for reporting to the Credit Reference Bureau. Nor will it affect the credit classification status or lead to a downgrade of such a credit facility for the duration of the credit relief measures.
He said, any loan granted relief shall maintain the same loan classification status over the 12 months to 30th September, 2022. Twinemanzi requested financial institutions to be transparent and for customers to understand the terms of borrowing in line with these credit measures. He said, “Bank of Uganda stands ready to even review these guidelines if there is need. If your bank is not helpful, look for one that understands you as a customer. Also take time and educate yourselves about financial services.”
Going forward, Twinemanzi said, the government should consider prioritizing key sectors like education by putting in place a special fund to support their recovery from covid-19 hit and any other future calamities. “It is also important for banks and borrowers to embrace negotiations in loans management and restructuring,” he said.
Mike Kironde, the National Chairperson for Proprietors of Private Education Institutions Association in Uganda, thanked Stanbic Bank for organizing the forum through which ideas for smooth re-opening of schools would be shared. He said private schools play an important role in growing Uganda’s economy through jobs and related opportunities.
Kironde said, 65 pc of students belong to private schools and the latter employs 800,000 workers, of which 500,000 are teachers and 300,000 are non-teaching staff. “We have learned the hard way on how to do things. It is important that we spend on necessities,” he said.
He said, they have learnt to do business depending on the need and also thought of the idea of having reserves to support their activities during tough times. Kironde welcomed the idea of loan restructuring and the entire credit relief measures, saying it would help his members to reorganize their operational plans and stabilize as time goes on. He also asked Stanbic to take lead in offering financial literacy programmes to schools to keep them alive in tough times.
Collectively, privately owned schools and teachers, owe financial institutions slightly over UGX1.5 trillion in loans, with nearly UGX500 billion in accumulated interest alone. Uganda’s education sector is over 28,000 schools’ strong of which 80% are privately owned. It has approximately 16 million students and contributes about five percent to the country’s GDP.