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APICE Curso de Credito Educativo. The Promise of Student Loans in Latin America And the World Bank’s Experience Andreas Blom, Cancun, October 4, 2004. What is the role of student loans? And how to fulfill this role?. Overview. The need for investment into tertiary education

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slide1

APICE Curso de Credito Educativo

The Promise of Student Loans in Latin America

And the World Bank’s Experience

Andreas Blom, Cancun, October 4, 2004

slide2

What is the role of student loans? And how to fulfill this role?

Overview

The need for investment into tertiary education

The role of Student loans

The HUGE promise of student loans in LAC

How to fulfill this promise?

World Bank experiences

Key Messages

slide3
Education as a poverty killer

Education for Competitiveness

The Need for investment into Education

slide4

The role of student loans:

Promote Tertiary Education with two key objectives:

  • Expansion
  • Equity
slide5

.

Finly

Australi

80

United S

Korea

Sweden

New Zeal

60

Canada

Argentin

Tasa de enrolamiento terciario bruto, 1998

Singapor

40

Chile

Panama

Costa Ri

Barbados

Thaily

Peru

Venezuel

Philippi

Hong Kon

Bolivia

Bahamas

Colombia

20

Mexico

Ecuador

Brazil

Honduras

Nicaragu

Guyana

Malaysia

Indonesi

Paraguay

Jamaica

Guatemal

Suriname

China

Trinidad

Haiti

Belize

0

5

6

7

8

9

10

11

Log de PIB per capita, 1998

The need for Expansion of tertiary education:

slide6

Mexico: Financial aid increases probability

of access to tertiary education by 24 %

The role of student loans in Expansion:

slide8

The Case of Mexico

PRONABES

The role of student loans in Equity:

slide9

What is the potential demand for

student loans in Latin America?

slide10

The potential is

HUGE

US$ 3,400 million per year

1.1 million students per year

slide11

How to fulfill this Huge Promise?

Who could finance such an expansion?

The graduates? Yes , Tertiary Education is a fabulous investment

BUT, only after graduation, we need capital

slide12

Who could bring capital?

The government? A little bit, more if money returns (Fiscal restraint and Inequitable)

The World Bank (through the government)? A little bit, (US$ 60-80 million a year)

BID (through the government)? A little bit

Private investors? Yes, but only if the money returns(through the government)

Without Financial Sustainability, student loans will not fulfill its promise

slide13

World Bank experiences:

Tertiary education projects in the World Bank

Student loan projects (components) in LAC: Jamaica (ended in 2002), Venezuela (ended in 2001), Chile (2005), Mexico (2005), Colombia (2008), and new in Mexico

Student loans as vehicle for investment into tertiary education

Student loan: an integral element of a well-functioning tertiary education system (For example: Student loans depends upon the system’s quality, relevance and institutional reform of tertiary education, among others)

slide14

WB Experiences I:

Design and incentives are critical

  • Professional management (not politically appointed management)
  • Strategic guidance from the government
  • Separate Loan from Scholarship
  • The student loan organization need incentive to collect
  • Cooperation and risk sharing:
    • Universities should contribute: Be the windows to the student (and share the risk, especially non-governmental providers)
    • Outsource: ICT, collection of overdue debt, management of funds etc.
slide15

WB Experiences II:

Effective and flexible collection is critical

  • Inform and maintain close contact with the client (the student)
  • Provide flexibility in repayment (grace periods and postponement, multiple ways to pay etc.)
  • Sanctions are NECESSARY (credibility of the government)
    • Report to credit bureau
slide16

WB Experiences III:

Efficient organization

Outsource /Alliances

Professional staff

Internet based system (completely)

slide17

Thank you for the attention,

Andreas Blom, World Bank

Key Messages

Education is critical for poverty reduction and competitiveness

The key role of student loans is expansion of the tertiary education system

Student loans have a HUGE potential in LAC

Without financial sustainability, student loans can NOT fulfill its promise

Healthy design, risk sharing, flexibility, sanctions for non-payment and outsourcing are good practices