HELB Reveals How KRA Will Help Trace Thousands Of Loan Defaulters In Informal Sector

The Higher Education Loans Board (HELB) is preparing to deepen its loan recovery efforts by partnering with the Kenya Revenue Authority (KRA) in a move aimed at tracing and collecting repayments from thousands of beneficiaries working in Kenya’s vast informal sector.

The proposed collaboration marks a significant shift in HELB’s recovery strategy as the board seeks to address one of its biggest challenges, recovering loans from graduates and former students who are self-employed, operate small businesses, or earn income outside the formal employment system.

Speaking during an interview on Tuesday, July 8, HELB Chairperson Ekwee Ethuro acknowledged that the informal sector has remained one of the institution’s most difficult areas for loan recovery because borrowers in the sector are not subjected to automatic payroll deductions like those employed in the formal workforce.

According to Ethuro, HELB believes KRA’s sophisticated data collection systems and nationwide reach could significantly improve the board’s ability to identify borrowers with the financial capacity to repay their education loans.

“That’s why we are exploring partnerships, and the KRA partnership is a very viable one,” Ethuro said.

He noted that KRA possesses stronger technological systems and broader access to financial information than HELB, making it an ideal partner in identifying individuals who have active economic activities despite operating outside formal employment.

“They have better systems, a greater outreach, and if you buy something, KRA will be knocking on your door,” he added.

For many years, HELB has relied largely on employer-based salary deductions to recover education loans from graduates working in the formal sector. However, this approach has left a significant gap, particularly among beneficiaries who ventured into self-employment, entrepreneurship, freelance work, the gig economy, or Kenya’s expansive jua kali sector.

Because these individuals do not receive regular salaries through registered employers, HELB has struggled to monitor their earnings or establish consistent repayment plans, allowing many borrowers to remain outside the institution’s traditional recovery mechanisms.

The board now hopes that integrating KRA’s digital systems and data analytics will enable it to identify financial activity that may indicate a borrower’s ability to begin or resume loan repayments.

Ethuro disclosed that HELB is currently grappling with a growing default crisis, revealing that more than 380,000 beneficiaries have failed to repay their education loans.

Out of these, over 124,000 borrowers have been classified as chronic defaulters due to prolonged non-payment.

More worrying, over 83,000 beneficiaries have gone for more than 10 years without servicing their loans and have consequently been listed with the Credit Reference Bureau (CRB), affecting their ability to access bank loans and other financial services.

The board attributes much of the growing default rate to the country’s persistent youth unemployment challenge, which has made it difficult for many graduates to secure stable sources of income after completing their studies.

HELB believes KRA’s advanced data-driven enforcement model could provide the breakthrough it has been seeking.

Unlike conventional audit methods, KRA increasingly relies on automated data matching, digital integrations and technology to monitor financial transactions and identify individuals engaged in economic activities.

The tax authority has, in recent years, strengthened its ability to track businesses through mobile money transactions, electronic tax invoices, till numbers, lifestyle audits, asset ownership records and other digital financial footprints.

These systems enable KRA to detect hidden turnover, identify undeclared income and trace businesses operating outside traditional tax channels.

Ethuro argued that such capabilities would enable HELB to identify borrowers who may not be formally employed but are financially active and capable of repaying their loans.

He explained that major purchases or significant financial transactions often leave digital records that KRA can detect, giving the authority access to information that HELB cannot independently obtain.

Despite the planned collaboration with KRA, HELB insists that its renewed recovery efforts are not intended to intimidate or criminalise loan defaulters.

Ethuro maintained that the objective is to encourage responsible repayment while recognising that HELB loans are revolving funds that enable future generations of students to access higher education financing.

He emphasised that the board wants borrowers to view loan repayment as a shared responsibility rather than a punitive exercise, noting that recovering the funds ensures sustainability of the education financing programme.

The latest proposal comes months after HELB intensified enforcement measures targeting borrowers employed in the formal sector.

Working alongside KRA, the board directed employers to submit employee records, identify workers with outstanding HELB loans and commence mandatory salary deductions. Employers are required to remit the deducted amounts to HELB by the 15^th day of every month.

In March 2026, HELB escalated its enforcement campaign by introducing penalties against organisations that fail to comply with the regulations.

Under the new measures, employers who fail to declare employees with outstanding HELB loans or neglect to remit the required deductions face a monthly fine of Ksh3,000 for each affected employee.

The penalties are backdated to the employee’s date of employment, significantly increasing the financial consequences for non-compliant organisations.

Ethuro revealed that the defaulting borrowers collectively owe HELB approximately Ksh20 billion, underscoring the magnitude of the challenge facing the institution. However, he noted that recent reforms have started yielding positive results.

According to the HELB chairperson, the board has registered improved loan recoveries through enhanced collaboration with employers, adoption of fintech solutions and greater use of technology to monitor repayments.

The planned partnership with KRA is expected to build on these gains by extending HELB’s recovery efforts beyond the formal employment sector and into the country’s growing informal economy, where thousands of loan beneficiaries continue to earn incomes outside conventional payroll systems.

If successfully implemented, the collaboration could significantly boost loan recoveries while strengthening the sustainability of HELB’s revolving fund, ensuring that future students continue to benefit from higher education financing.

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