Reform in higher education financing in Kenya has been occasioned by both endogenous and exogenous variables. Internal pressures of a declining economy, rapid demographic growth and increased inter-and intra-sectoral competition for scare financial resources, couple with external neo-liberal doctrine championed by global donors like the World Bank have resulted in a new market-competitive policy of financing higher education. This paper analyzes the equity and risk effects of the new policy for the main stakeholders, namely students, academics and institutions themselves. The paper contends that the policy shift has had a significant effect on equity just as it has introduced universities to risks through engagement in academic capitalism with its emphasis on marketization of university programs and services. The paper concludes with suggestions on some policy options that could help to mitigate the negative consequences of this new policy.

Kenya has a long history of lending to students; but in the 1980s, the program was criticized for its poor administration, high costs, and low recovery rates. The estab- lishment of the Higher Education Loans Board in 1995 ushered in reforms that have broadened the program beyond the public universities to other postsecondary institutions and to some students in Kenya’s growing private sector and improved loan recoveries. This article describes these efforts to improve recoveries and makes a number of recommendations, including more realistic (i.e., higher) interest rates, more aggressive enforcement of loan recoveries, more effective targeting (i.e., means testing), and greater use of banks and other private capital sources. The use of student loans is an effective tool for increasing participation and equity, although the government must do more to improve the accessibility of secondary education, which is where much of the inequity currently resides.

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Like the rest of the continent, Kenya has a relatively long history of public provi- sion of higher education. Policy reforms in the 1980s resulted in the legitimate recognition of the private sector. Emerging competition has forced both sectors to adopt specific coping strategies, and foster different types of provision such as: traditional setting up of private institutions; privatization of public sector institu- tions; franchising and other forms of partnerships; and internationalisation. Pri- vate universities are also venturing into alternative modes of delivery like evening programmes. On the legal front, intense regulation of the private sector is leading to evident seriousness, but at the same time is giving the public sector an undue advantage over the private, as it remains largely unchecked.