August 07. 2010 - Student loans are a part of everyday life for individuals seeking to fund their education in many parts of the world.
In the UAE, however, the traditional road for expatriate students has been to tap the family finances to pay for their higher learning.
But globalisation, the financial crisis and a growing prioritisation of education has resulted in a shift away from this attitude, leading the country’s banks and universities to band together to offer new ways for students to fund their studies.
Abu Dhabi Commercial Bank (ADCB) and Mashreq Bank recently linked with higher learning institutions to form partnerships that give families access to loans that will enable their children to pursue their educational dreams, despite their financial situation.
ADCB introduced its education loan, which is “designed to ensure that finance, or rather the lack of it, does not get in the way of the higher education aspirations of any meritorious student”, says Rahul Unny, the vice president for consumer banking at ADCB.
“We constantly endeavour to uphold the educational development in the UAE to embody the Government’s plan to build the new generation of students, enabling them to take part in the evolutionary process in the UAE.”
Mr Unny says ADCB’s education loan can be obtained without the commitment of a salary transfer. The minimum education loan amount offered by the bank is Dh10,000; the maximum amount is Dh150,000, depending on the student’s or parents’ eligibility. The loan can be repaid over a period of up to 60 months at 14 to 16 per cent interest.
So far, ADCB has partnered with the University of Wollongong in Dubai (UOWD), Intelligent Partners, Institute of Management Technology, the Manchester Business School and the American University of Ras Al Khaimah.
Mashreq Bank has partnered with Murdoch University and the Institute of Management Technology (IMT). The schools are in Dubai International Academic City.
“We realised that education is one of the highest priorities in our customer’s lives,” says Niranjan Mendonca, the head of retail assets at Mashreq Bank. “So we thought we should also focus on education in order to provide our customers an additional way to fund their education.”
Universities do not have to be linked to banks for students to access educational loans. They can approach any bank that offers a personal-loan facility to finance their education, but the advantage of these partnerships is to package the loans to benefit students.
“As a university we felt the need to enable everyone who is qualified, to be able to get quality education regardless of his or her financial situation. That is the main reason we had to get creative,” says Raghav Lal, the strategy and business development manager at Murdoch University.
Students at Murdoch University can apply for a loan from Mashreq Bank at an interest rate of 10 per cent. The average interest rate for educational loans from banks in the UAE ranges from 9 per cent to 12 per cent. But Murdoch students who take out a loan with Mashreq Bank receive a 15 per cent tuition fee discount for the first year of the loan, which helps to offset a large portion of the interest rate.
“Murdoch University’s basic premise is to always ensure all students are given equal opportunities,” says professor John Grainger, the pro-vice chancellor of Murdoch University. “In today’s financial environment, it is not uncommon to have cash-flow issues and we are extremely happy to be able to address such problems. The collaboration with Mashreq will enable students to pursue their qualifications regardless of any short-term concerns with funding.”
Students or parents interested in Mashreq’s education loan can apply for all or part of the tuition expenses. A minimum income of Dh7,000 is required for applicants, and repayments are affordable through flexible plans.
The loan programmes are mainly designed to benefit expatriate families since most Emiratis have their education funded by the Government.
“In the UAE, 60 to 70 per cent of the population is of South Asian origin and to these families education is very important, so these and other expatriates who are residents here are the ones who will benefit the most from our student loans,” says Mr Mendonca.
The Mashreq education loan covers the entire tuition expenses of applicants, while ADCB’s loans are capped at Dh150,000.
“With the partnership, the bank can finance part of our tuition, but there will still be some Dh30,000 that students will need to raise themselves,” says Manoj Mathew, the finance manager at UOWD. “We wished ADCB would cover the entire amount, but we were able to negotiate up to Dh150,000.”
Mr Mathew says UOWD students can also approach Dubai Islamic Bank, which offers a similar education loan.
The country’s universities and banks hope to expand these kinds of partnerships.
The programmes also will help professionals wanting to pursue specialised education or higher degrees. “Higher education should be accessible to all,” says Mr Mendonca.
