Edmond Campbell, Senior Staff Reporter
Gov't-owned lending agency struggles to find funds to make disbursements
THE Students' Loan Bureau (SLB) appears to be currently on a perilous trajectory which has been more formally described by one of Jamaica's leading consulting firms as an entity "faced with a crisis of its own viability".
A recent study of the SLB by PricewaterhouseCoopers made it clear that the challenge confronting the lending agency "will require key policy decisions that can only be addressed by the GOJ (Government of Jamaica) in consultation with its various stakeholders."
Finance Minister Dr Peter Phillips, at a recent Jamaica House briefing, indicated that the Government would be examining a number of studies in relation to the SLB in the near future.
Yesterday, Monica Brown, executive director of the SLB, made a startling revelation in Gordon House when she told a parliamentary oversight committee that the bureau was struggling to make disbursements, on behalf of students, to tertiary institutions.
She said for the academic period 2012-2013, the institution was facing a significant challenge to meet the $4.2 billion to be disbursed to the universities and colleges.
"So far, approximately $1.7 billion or 41 per cent of the projected $4.2 billion to be disbursed has been identified. The discussions are continuing with lending institutions in an effort to reach an agreement for the needed funds to close the funding gap," she told members of the Public Administration and Appropriations Committee (PAAC).
The PricewaterhouseCoopers study mirrors another research done by the Caribbean Development Bank (CDB), which indicated that the SLB's current loan model cannot sustain the growing demand for student loans without significant annual increases in capital.
The CDB report of 2011 stated that funding from loans should not be the only option, as interest payable on borrowed funds, particularly during the moratorium period of the student loan, would result in cash-flow shortages which would have to be funded by capital injection.
This situation would limit the prospect for borrowing in the future, the report added.
The SLB executive director, who commented on the findings of the PricewaterhouseCoopers study and the CDB report, said that even with a hundred per cent compliance rate, on the part of borrowers, the increased demand for more student loans calls for greater capital injection in the institution.
At present, the lending agency is battling a delinquency rate of 30 per cent.
"What we really need is a clear policy direction as to where we are going with the funding of tertiary education and SLB's role," the bureau's executive director added.
The PricewaterhouseCoopers consultants have projected a growth in demand for student loans to $34.5 billion by 2016-2017 and $87.73 billion by 2020. With this forecast, the consultants have outlined the need for an injection of funding to the tune of more than $26 billion for the five-year period ended 2016-2017 in order to close the funding gap and an overall total of $64 billion by 2020.
The SLB head reported a 153 per cent increase in loan applications over a six-year period.
She said between 2007 and 2012, the loan application jumped from 6,600 to 16,676.
For this year alone, the SLB received 16,676 applications which represent a 23.5 per cent or 3,176 increase over the 13,500 applications received in 2011.
The SLB executive director also noted that the high levels of unemployment, along with what she said was a culture of entitlement among some SLB beneficiaries, have resulted in a high rate of delinquency which has served to exacerbate the funding concerns of the SLB.
She said a study has revealed that approximately 49 per cent of students who graduated in 2010 could not find a job or are underemployed.
A proposal has been made for the laws to be amended to enable deductions at the source of income, which she said would help the SLB to collect from borrowers.