Role of financial institutions in funding tertiary education

Accra, (Greater Accra) 16 Feb. '99, --

A 10-member technical committee to make proposals for the financing of tertiary education has been formed in Accra.

The committee is made up of representatives from the National Council on Tertiary Education, non-banking institutions, banking institutions, Ministry of Finance, insurance companies, SSNIT and the Ministry of Education.

This follows discussions between the Ministries of Education and Finance and representatives of financial institutions yesterday on how the institutions could support the government to finance tertiary education.

It will be recalled that government initiated a series of forums and workshops between 1995 and 1998 with Administrators of Tertiary Institutions on the funding of tertiary education.

The technical committee will recommend what form the fund should take, who should contribute and manage it.

Those present at the meeting included representatives form the National Council of Tertiary Education, EcoBank, Trust Bank, Merchant Bank, Standard Chartered Bank, Ghana Commercial Bank, Donewell Insurance and officials from the Ministry of Education.

Addressing the meeting, Mr Ekwow Spio-Garbrah, Minister of Education, called for support from the public and private sector financial institutions towards financing the students loan scheme to make it sustainable into the future.

''Public and private sector sponsorship of tertiary education should be encouraged to help reduce the burden on the central government and the Social Security and National Insurance Trust (SSNIT), to prevent the loan scheme from collapsing'', the minister added.

Mr Spio-Garbrah said: ''While the payment of user fees by students seems to have been partially settled, the greatest problem that faces tertiary education, that is the student loan scheme, is yet to be fully examined to determine its sustainability''.

Mr Spio-Garbrah said funding of tertiary education in the universities is projected to increase from 207 billion cedis in 1999/2000 to 273 billion cedis by 2000/2001, while that of the polytechnics will rise from 17 billion cedis in 1999/2000 to 28 billion cedis in 2000/2001.

The Minister announced that a report submitted to government by SSNIT, made it clear that the student loan scheme is on the brink of collapse and that only between eight per cent to nine per cent of annual social security receipts could be made available.

Dr Mohammed Ibn Chambas, Deputy Minister of Education responsible for tertiary education, said one aspect of the loan scheme which poses problem is the huge government subsidy element of the interest rates which, he described as ''a big drain'' on tertiary institutions.

He said although government budgeted for seven billion cedis to support the students loan scheme last year, it ended up paying nine billion cedis adding that putting in more money to expand the loan scheme is now a big problem as government is unable to invest in other equally important projects under his ministry.

The participants accepted to take up the challenge to support the loan scheme but they were worried at the poor rate of loan recovery due ''to inadequate loan recovery mechanisms''.

They said before any serious commitment is made, the government should ensure that deficiencies in the administration of the scheme are corrected and payment of realistic interest rates are introduced.

They also called for a package of incentives to attract private sector participation and underscored the need for an employee and employer education levy which should start from those in the formal employment sector and gradually to envelope those in the informal sector to sustain the loan scheme in the future.