Home ›› 20 Dec 2022 ›› Front
Fatema Islam, who is now studying at Cumilla Government Women’s College, has always been a very bright student. Ever since primary school, she has been making her parents proud.
However, when Fatema failed to get into a public university, the young woman thought about trying her luck at private university admission. But that avenue also did not work as her father, a farmer by profession, was unable to bear the expenses.
Broken-hearted, she decided to take a loan and visited some banks. But she found out the hard way that meeting the conditions to get such a loan is quite impossible for her farmer father.
Not only for Fatema but the dreams of studying at their desired higher educational institutions of many students are getting shattered due to the lack of financial support from their insolvent families.
The country’s education system is subsidised up to the higher secondary level but when it comes to tertiary education, there are only a handful of such public universities.
Many of the students, who do not pass public university admission tests, have to opt for private universities that charge higher fees. But not many families can afford to meet such costs.
While education loans are often recommended as a solution, they are not as available as anyone would like to those who are in actual need.
For such students, the modern banking system has introduced education loans, which work in the same way as other loans.
Depending on the bank, a student can borrow a minimum of Tk 5 lakh to a maximum of Tk 20 lakh to pursue higher studies at home and abroad. The loan is available for a minimum of one year and a maximum of six years with three months moratorium, depending on the courses.
The banks that provide education loans include Eastern Bank, BRAC bank, Uttara bank, Mercantile Bank, Islami Bank, IFIC Bank, One Bank, Dhaka Bank, NCC Bank, Jamuna bank, and Agrani Bank.
Tough conditions
However, allegations have been made that students with the actual need are unable to take education loans because they cannot fulfil the tough conditions of the banks or NGOs.
Many countries provide interest-free education loans to students pursuing higher education but the banks in Bangladesh charge up to a 9 per cent interest rate.
In developed countries, such loans are issued directly to students against their merit and future job prospects but the situation is different here.
The loan plans here are mostly depended on the income of the parents, not the merit and future job prospects of the student. Banks require collateral or a guarantee that the loans will be repaid.
It is one of the major obstacles most prospective clients face. Oftentimes, the income of the parents does not meet the requirements, resulting in a rejection of the students’ applications.
To be eligible for an education loan, the parents generally have to show a monthly earning of Tk 20,000-30,000 but that appears not always possible for most poor students.
Talking to The Business Post, Habibur Rahman, a degree student at a private college under the National University, said, “One of my friends told me about the education loans that banks offer. I felt it would be great if I could get a loan from a bank for my higher study and repay the money after completing my study.”
“But, I found out that these loans are tailored around the income capacity of the parents. Since my father’s income was not up to the required level, I was ineligible to even apply for the loan,” he added.
However, bank officials say education loans are extremely risky and uncertain because banks do not have a guaranteed way to get the money back from the borrowers.
Another barrier is the uncertainty of employment because of the highly volatile job market in Bangladesh. Hundreds of thousands of fresh graduates enter the job market every year and not all of them are accommodated which creates risk, bankers said.
Even after securing jobs, many poorly-paid youths find themselves in a tough position to repay the loans on time. That’s why banks show reluctance to grant education loans.
Not popular yet
When asked, former University Grants Commission (UGC) chairman Prof Abdul Mannan told The Business Post that the education loan culture has impressively developed in other countries but the system is yet to gain popularity in Bangladesh due to various reasons.
Mentioning that getting education loans from banks in Bangladesh is not an easy process, he urged the banks to increase scholarships for the students from their Corporate Social Responsibility (CSR) fund to help the poor students pursue higher studies.
Emranul Huq, managing director and CEO of Dhaka Bank Limited, agreed that the facility is yet to become popular even though some banks have started providing education loans to students.
There are no special privileges when it comes to education loans. They are just like other consumer loans and the interest rate is also similar, he said.
However, some banks provide stipends and scholarship facilities for educational purposes from their CSR funds that are also helping the poor students, he added.
Meanwhile, Grameen Bank (GB) is providing an education loan facility to the children of the bank’s officials, who say their facility has become popular because their conditions are easier compared to other banks.
According to GB data, a total of 54,664 students have taken education loans worth Tk 391.753 crore from the bank between 1997 and 2020.
No national loan scheme
Experts have said that a national student loan scheme has the potential to significantly improve the current higher education scenario.
Countries like India, Pakistan, Sri Lanka, Ghana, South Africa, Australia, and Sweden have such schemes with some variations. All these have proved to be very successful.
Education loans are also common in developed countries such as the US, Australia and Canada where they are guaranteed by the federal government. Bangladesh is yet to introduce such a national loan scheme.
“I think a national student loan scheme should be introduced for the students very soon,” said UGC Member Prof Dr Muhammad Alamgir.
“Since many students cannot afford higher education in public or private universities due to financial hardship, the banks and financial institutions can come forward to help them,” he told The Business Post.
He added, “We are losing many talented students because they cannot continue higher studies due to financial problems. A loan scheme can help and protect them.”
Sources say a bilateral agreement between a university and a bank can pave the way to mitigate the risks regarding education loans. If they come to an understanding, the university can work as a facilitator of its students’ loans and can guarantee the repayment on their behalf.
The government and banks can work together to come up with a feasible solution to reduce the risks of loan defaults and unemployment, which in turn will also enable banks to charge less interest from students.
Experts also stressed that the interest rate should be lowered and banking procedures made easier to make loans more accessible so that students are not discouraged to pursue higher studies.
