AfricaPress-Tanzania: THE government said on Wednesday that it is in the process of reviewing loan repayment deductions of 6 per cent Value Retention Fee (VRF) charged annually from outstanding loan balance of loans from beneficiaries who are servicing their loans owed by the Higher Education Students’ Loans Board (HESLB).
The move aims at reducing the burden of loan repayment to employees who have been complaining of increased interest on their debts.
However, the government came out strongly denying that it was not charging the 10per cent penalty on the debt owed by a beneficiary who has not come forward to begin repaying the loan after graduation as prescribed by law.
The new revelation was made here by the Minister of Education, Science and Technology, Professor Joyce Ndalichako when responding to supplementary questions posed by Busokelo MP, Atupele Mwakibete (CCM) and Special Seats lawmaker, Halima Mdee (CHADEMA), who said that various charges and fees have turned to be a burden to poor Tanzanians who were taking longer periods to clear their loans.
Ms Mdee named the rates charged as the six per cent Value Retention Fee (VRF) which ought to be charged annually from the outstanding loan balance, 15per cent monthly deductions from salaries of employees and 10 per cent penalty imposed on beneficiaries who delay repayment of their debts.
“When will the government bring amendments in the HESLB Act (2016 Amendments) which proposes various fees charged on loans beneficiaries, because servicing the loan has now turned out to be a business for HESLB,’’ she queried.
After the amendment of the legislation in 2016, HESLB introduced three charges, including a six per cent value retention fee (VRF) charged annually on the outstanding loan balance which aimed at increasing the value of loan financing offered to beneficiaries.
On March 3, 2021, the board’s executive director, Abdul-Razaq Badru explained that the purpose of this charge is to enable the government, through HESLB, to have a sustainable fund that will enable it to lend to others without compromising the value of the money issued as loans to beneficiaries.
HESLB also imposes loan administration fee amounting to one per cent per annum which is charged once a year on the principal loan of the beneficiary to facilitate operational activities of the board, including improving technological systems, finding beneficiaries and sending invoices among other activities.
The Board has been consistently insisting that it also charges a 10 per cent penalty on the debt owed by a beneficiary who has not come forward to begin repaying the loan after graduation as prescribed by law.
For pre-2016 graduates, the repayment begins 12 months after graduation, and for graduates from 2017 (when the law was amended) is charged within 24 months.
However, Prof Ndalichako told the National Assembly that it was not true that the government was charging 10 per cent as interest on the principal loan.
The minister and his deputy, Omar Kipanga assured Members of Parliament that the government was in the process of reviewing the six per cent VRF.
“After the ongoing review, we will immediately table a motion for amendment of the legislation so that we can ease the burden of loan repayment to lenders.
