Taiwan is offering students in five Central American countries more than US$20 million in low-cost student loans. Analysts see the move to court the region, which has low higher education enrolment rates, as part of the ongoing battle between Taiwan and China over political allies in the West.
The programme, which is administered by the Central American Integration Bank (BCIE), provides loans to prospective students in Honduras, El Salvador, Costa Rica, Nicaragua and Guatemala.In a region with university enrolment rates of only 18%, compared to 28% in all of Latin America, and limited availability of student credit, the programme is bound to have an impact, said officials from the BCIE.“We are conscious of the fact that many people can’t access education because they don’t have the financial means to do so,” said Ruben Mora, Costa Rica director for BCIE.
"The idea is to create opportunities for more people to form part of the higher education system, which will lead to better jobs, improved economic conditions and better economic development.”More than US$20 million is available under the investment from the Taiwan government, which will be paid out to countries based on demonstrated need and interest.
Asked why Taiwan is investing in educational systems in a region on the other side of the world, political analysts said it was part of the ongoing tussle between Taiwan and mainland China over political allies in the West. Taiwan has been aggressively pursuing free-trade agreements with Central American countries, offering diplomatic gifts such as the ‘Friendship Bridge’ in Costa Rica and seeking face-time with Central American presidents through high-level diplomatic visits.
“China has also sought to use investment and funding to encourage Latin American countries to officially recognise China instead of Taiwan, thereby weakening Taiwan’s global support for a role in the international arena,” reads a report for the US-China Economic and Security Review Commission.The loan programme is only part of the ‘cheque-book diplomacy’ and responds to a request from the BCIE to invest in the region’s human capital.Historically, access to higher education for university students has been challenging due to limited spaces in public universities and high tuition costs in private universities.
Existing student loans carry elevated interest rates (13% to 15%) and only give students five years for repayment.Furthermore, the framework for taking out student loans is lacking in Central America: loans are more commonly processed for commodities such as cars and homes, according to Mora. Personal loans are virtually non-existent.
The BCIE loan programme allows a five-year grace period for repayment, lower interest rates (between 5% and 9%) and a 15-year payment plan for college, masters and postgraduate studies.“The idea is to give students easy access to credit in order for them to start and finish their studies without the concern of a loan with a high interest rate and a short time frame in which to pay it,” Mora said.
Since the programme’s inception in 2011, 50 students have taken out loans in Nicaragua and Honduras. Eight universities have signed agreements with BCIE and an additional six are in the queue.“There’s room to grow,” Sonia Irias, a BCIE representative told the daily El Nuevo Diario. At the first college fair promoting the programme in Managua, Nicaragua, she said it was just beginning. “There are funds available to cover a greater demand – a demand which is really without limits.”
Lucia Lourdes, a 25-year-old radio producer in Guatemala who graduated from La Universidad de San Carlos, said low-interest loans have great potential for those with limited access to education. “It’s a huge opportunity for all those who aren’t able to pay for studies,” she said. “And when more opportunities are generated, a higher number of professionals will be able to compete and offer their professional training to society.” Mora said the bank had carefully analysed the risk involved in lending to the student population, and found that university students had matured to the point that timing was right for such a programme.
“The arrival of foreign investment in the form of multinational businesses and the fact they need highly qualified workers has pushed programmes like this to move more quickly,” he said.“In general in Central America, there have been important advances to make way for this. Yes, there is a risk, but there is also a need to invest in the development of human capital in the region.”
The programme, which is administered by the Central American Integration Bank (BCIE), provides loans to prospective students in Honduras, El Salvador, Costa Rica, Nicaragua and Guatemala.In a region with university enrolment rates of only 18%, compared to 28% in all of Latin America, and limited availability of student credit, the programme is bound to have an impact, said officials from the BCIE.“We are conscious of the fact that many people can’t access education because they don’t have the financial means to do so,” said Ruben Mora, Costa Rica director for BCIE.
"The idea is to create opportunities for more people to form part of the higher education system, which will lead to better jobs, improved economic conditions and better economic development.”More than US$20 million is available under the investment from the Taiwan government, which will be paid out to countries based on demonstrated need and interest.
Asked why Taiwan is investing in educational systems in a region on the other side of the world, political analysts said it was part of the ongoing tussle between Taiwan and mainland China over political allies in the West. Taiwan has been aggressively pursuing free-trade agreements with Central American countries, offering diplomatic gifts such as the ‘Friendship Bridge’ in Costa Rica and seeking face-time with Central American presidents through high-level diplomatic visits.
“China has also sought to use investment and funding to encourage Latin American countries to officially recognise China instead of Taiwan, thereby weakening Taiwan’s global support for a role in the international arena,” reads a report for the US-China Economic and Security Review Commission.The loan programme is only part of the ‘cheque-book diplomacy’ and responds to a request from the BCIE to invest in the region’s human capital.Historically, access to higher education for university students has been challenging due to limited spaces in public universities and high tuition costs in private universities.
Existing student loans carry elevated interest rates (13% to 15%) and only give students five years for repayment.Furthermore, the framework for taking out student loans is lacking in Central America: loans are more commonly processed for commodities such as cars and homes, according to Mora. Personal loans are virtually non-existent.
The BCIE loan programme allows a five-year grace period for repayment, lower interest rates (between 5% and 9%) and a 15-year payment plan for college, masters and postgraduate studies.“The idea is to give students easy access to credit in order for them to start and finish their studies without the concern of a loan with a high interest rate and a short time frame in which to pay it,” Mora said.
Since the programme’s inception in 2011, 50 students have taken out loans in Nicaragua and Honduras. Eight universities have signed agreements with BCIE and an additional six are in the queue.“There’s room to grow,” Sonia Irias, a BCIE representative told the daily El Nuevo Diario. At the first college fair promoting the programme in Managua, Nicaragua, she said it was just beginning. “There are funds available to cover a greater demand – a demand which is really without limits.”
Lucia Lourdes, a 25-year-old radio producer in Guatemala who graduated from La Universidad de San Carlos, said low-interest loans have great potential for those with limited access to education. “It’s a huge opportunity for all those who aren’t able to pay for studies,” she said. “And when more opportunities are generated, a higher number of professionals will be able to compete and offer their professional training to society.” Mora said the bank had carefully analysed the risk involved in lending to the student population, and found that university students had matured to the point that timing was right for such a programme.
“The arrival of foreign investment in the form of multinational businesses and the fact they need highly qualified workers has pushed programmes like this to move more quickly,” he said.“In general in Central America, there have been important advances to make way for this. Yes, there is a risk, but there is also a need to invest in the development of human capital in the region.”
