BEIRUT: Four years ago, when most of the world was reeling from the impact of the global financial crisis, Lebanon – with its conservative banking system that avoided financial collapse – was looking for places to put its excess deposits. One of its many solutions to this enviable problem was to offer low-interest student loans at around 3 percent. The customer was protected against market fluctuations, and there was a one-year grace period after graduation to begin repayments.
The idea was that ensuring the education of future generations would be a good long-term investment in Lebanon.
By contrast, in the United States, the interest rate on student loans – previously at 3.4 percent – was in July doubled to 6.8 percent and made subject to market fluctuations.
Through Lebanon’s Central Bank, local banks, including Banque Libano-Francaise, began in 2009 offering low-interest student loans, which up until then had only been available in the form of consumer loans.
“This has been the strategy of the Central Bank. They saw a need for subsidized loans, and they wanted to target customers that need them,” says Ronald Zirka, head of marketing and retail at BLF.
Until this change in policy, loans for university studies were offered to parents rather than the students.
This switch has given BLF and other local banks the opportunity to build their customer base as they open new accounts for people in their late teens who will be coming back for the next 10 to 20 years – although usually with their parents as guarantors for their loans.
“We changed our strategy and looked to the future,” says Zirka.
Over the past three years, more than 25,000 youths opened accounts at BLF.
BLF has three products for its young customers. The tailored INSEAD 3.5 percent interest loan allows students to begin paying off their loan one year after graduating from the prestigious global business school.
Through its partnership with Universite St. Joseph, Association Philippe Jabre and Conseil Supérieur de la Communauté Grecque Catholique, BLF has helped 300 to 400 students per year.
These options have been subsidized by the Central Bank. In addition, BLF offers nonsubsidized loans at 7.8 percent interest that are paid on a quarterly basis.
“With our products, any student can have access to any university” for which they qualify, says Zirka.
Since 2009, BLF has approved a total of 2,000 educational loans at a rate of 400-500 students resident in Lebanon per year, irrespective of nationality, with 20 percent opting to study abroad.
The money, issued on a quarterly basis upon submission of the university payment slip and after the bank reviews the customer’s grades for the previous year, covers tuition as well as all other student expenses.