Kulhudhuffushi Member of Parliament (MP) submits a bill to the parliament on enforcing the banks to give study loans of at least MRF15 million annually, collectively MRF90 million per year from 6 banks operating in Maldives. According to the draft, loans range from MRF57,000 to MRF500,000 and repayment starts 6 months after completion of studies, with a repayment period of 10 – 15 years. Interest rates can go upto 8%. The government guarantees 60% of the loan and remaining 40% by the student.
If you were a student the news would be delightful to hear, especially if you were financing your studies on your own. As for bank managers, this might cause them cry out laud, at least for a while. Even though money is not lent for free as per the drafted bill, it has never been practiced in Maldives and there are solid reasons.
The legislation system in Maldives has been extremely unstable for the past few years, due to so many reasons one cannot list out, and for all these years the banks were not prohibited of issuing the so called student loan which is practiced in many developed countries around the globe. So, why has no bank started this loan and earned the interest?
Banks do business with cash; they buy and sell or exchange cash in different forms and means. As per my knowledge, so far the government has not enforced any bank to follow any form of loan scheme in Maldives, allowing the banks to practice free trade. May be this is one of the reasons that several overseas banks had applied for operating license in Maldives; free trade of banking has encouraged remarkably over the years.
When it comes to an enforced student loan scheme to be practiced by all banks operating in Maldives, banking may not become unprofitable even with unstable legislation and high records of criminology. But, when a respective Member of Parliament submits such a bill which does not balance the mechanism of free trade, in my opinion, Maldives may lose confidence by potential investors. Even if other Members of Parliament reject the bill, still the issue of instability remains bold in potential investors who are already withholding the planned projects just for lack of confidence.
Baseless bills submitted to the floor, even if they didn’t get passed, and even if the candidate didn’t get showered with support, it might shake up investors and certainty of instability would become more certain with every unfolding story as such.
Providing student loans are as important as providing free and fair banking in the country, or less than that. So, having initiated this issue in the parliament, the MP may deserve some credit, only if it does not exceed its negative inplications. So, now I’m stuck halfway through. Therefore, getting back to the topic, it might be more effective for the MP himself and for fellow Maldivians if the bill was drafted on a recognition system in exchange for student loan scheme.