Educational Loans Will Accelerate Economic Development

Gunay Guliyeva

Chief Analyst of CAERC

18 June 2021, 10:32

 Educational Loans Will Accelerate Economic Development

The Decree of the President of the Republic of Azerbaijan Mr. Ilham Aliyev on a number of measures related to the establishment and operation of the Student Loan Fund under the Ministry of Education of the Republic of Azerbaijan is the most important step taken to ensure access to education. Nowadays, it is crucial to financing the education system that is considered a guarantor of effective and sustainable economic development in the country. From this perspective, the newly established Fund will provide equal opportunities for those who want to study, acting as one of the newest mechanisms for financing education.

           The words of President of the Republic of Azerbaijan Ilham Aliyev, saying “in the development of modern world civilization, human capital and intellect are crucial as a new quality factor. The path to prosperity and progress of any state lies in the science and innovation-based development” were selected in “Azerbaijan 2030: National Priorities for Socio-Economic Development”. Mr. President has thus identified human capital as the main driver of sustainable economic development of our country in the next 10 years.

           According to the World Bank’s report entitled The Changing Wealth of Nations 2020, human capital makes 64 percent of the global wealth, 70 percent of high-income countries, and 41 percent of low-income countries. Raising the share of the human capital in the country’s wealth is one of the main priority issues for the next 10 years.

           To be ready for the new type of competition created by the 4th industrial revolution in the world and to ensure sustainable economic development, each country must build highly competitive human capital. An ecosystem that promotes modern and lifelong learning and innovation is a prerequisite for this. Years ago, under the slogan "Let's turn black gold into human capital," the head of state expressed the value given to a human - the main driving force of our economic development.

The Student Loan Fund will be a new resource channel for young people from vulnerable groups or low-income families, as well as those who cannot benefit from state education financing mechanisms. It should be noted that about 50 percent of higher education is state-financed. New Fund The new fund does not replace the existing state funding mechanisms for those who want to study but opens up additional opportunities.

Internationally, there are numerous student educational loan funds in the developed countries functioning under various names. For example, Federal Student Aid Office is functioning in the USA under the Ministry of Education for providing education to low-income families. The Fund offers various types of loans, including grants, study and work, student scholarships, and low-interest long-term loans. One of the most interesting facts is that the key slogan of the Federal Student Aid is “You Are America’s Smartest Investments”. That is how the USA defined human capital as the main investment of economic development.

      “The competitive advantage of today and tomorrow lies less and less in infrastructure, and more and more in the knowledge and skill of the workforce – the human capital advantage.” Laprade (2005).

The Organization for Economic Co-operation and Development (OECD) defines "knowledge, skills, and competencies as features that facilitate the creation of personal, social and economic well-being".

     Previously, the realization of ideas on investing more in human capital rather than in physical capital was reflected in the State Strategy for the Development of Education in the Republic of Azerbaijan, Strategic Roadmap for the National Economic Prospects of the Republic of Azerbaijan, State Program on the Education of Azerbaijani Youth Abroad for 2007-2015, and the State Program on Increasing the International Competitiveness of the Higher Education System in the Republic of Azerbaijan for 2019-2023. The establishment of the Student Loan Fund is the logical sequence of the mentioned approach. In the period of the transition from a resource economy to an economy of efficiency, the best economic resource to replace our black gold - oil, may be the human capital of our country.

“The most valuable of all capital is that invested in human beings.”

Alfred Marshall

It is possible to ensure the international competitiveness of the Republic of Azerbaijan by ensuring investment in the development of human capital, which characterizes sustainable development, as well as in science and education. For this purpose, our government uses all education support mechanisms that are applied in the developed countries. In their turn, each citizen should assess oneself as the main capital of our country and, by constantly increasing one’s potential through received investments, contribute to our economic development.