Education as investment THE SUNDAY GLEANER, MARCH 6, 2022 | BUSINESS C5 HIGH-TECH CONTINUED FROM C4 agricultural sector caused by natural catastrophes are huge. According to a 2020 report from the Food and Agriculture Organization of the United Nations covering the period 1994 to 2010, the impact of hurricanes, tropical storms, floods, bush fires, and drought generated losses in Jamaica’s agriculture sector of US$165 million. In annual terms, this amounts to around US$11 million per year (approximately $1.65 billion per year at the current exchange rate). Fast-forward to 2021, the losses could be averaging $150 million to $160 million each month. To put those numbers in perspective, the total allocation to the Ministry of Agriculture & Fisheries in the 2022/23 budget for recurrent expenditure was $10.2 billion. The Jamaican government, clearly, in the absence of insurance, has been unable to provide the financial resources to compensate farmers for the losses they have suffered over the years. In April 2018, in ‘Insurance as a Farming Tool’, I wrote that historically, Jamaica suffers losses due to natural disasters of about two per cent of gross domestic product annually, and that between 2001 and 2010, the impact of natural disasters was estimated at $113.7 billion, according to the Planning Institute of Jamaica. Given this history and these data, here’s why the present efforts to develop a local agricultural insurance capacity are likely to succeed when other attempts in the past have failed. • A local private-sectorled project group, working in association with colleagues in Asia and Europe comprising experts in artificial intelligence, machine learning, computational risk modelling, crop modelling, remote sensing, satellite systems engineering, insurance, reinsurance, crop insurance, data analytics, and Big Data and other specialities, has been engaged during the last four years in exploring the use of technological interventions to solve the insurance supply-side problems. • The multidisciplinary, multicultural team has deployed cutting-edge technologies and knowledge, that have been successfully applied in Asia, to address local problems and to fill in information gaps. • Group members have expended thousands of man-hours conducting research. • The group is working in collaboration with a global insurance brand with expertise in crop insurance. • Members of the project group plan to hold a series of discussions with stakeholders to get feedback when work on the preliminary product design has been completed. • There is a likelihood of obtaining grant funding to implement the project, if the pilot project is successful. • The lessons learned from the private-sector designed insurance scheme for coffee farmers, where problems were encountered in quantifying claims post-catastrophe, often in inaccessible terrain will be avoided in the structure of the proposed programme. The proposed target group for the coverage will be ‘aggregators’ like financial institutions. n Cedric E. Stephens provides independent information and advice about the management of risks and insurance. For free information or counsel, write to: aegis@flowja.com or business@gleanerjm.com A HIGH-SCHOOL student living in poverty but doing well at school cries out for help at about the same time that several students return home from war-torn Croatia, where they had gone to get an affordable education, brings into very clear focus the importance of education. Education is investment, and as such, has a very important place in personal financial planning, perhaps more so than other elements such as money management, investment in securities, estate planning, retirement planning, and insurance. The truth is that a solid education is critical to an understanding of and the implementation of the various elements of personal financial planning, and the more an individual is able to understand and use these tools, the less need there is to depend on others for guidance and support in decision making. INVESTMENT IN HUMAN CAPITAL Education is considered an investment in human capital, that is, the knowledge, abilities, and skills of an individual that help the individual to be employable and more productive. This improves the ability to earn higher levels of income as well as to earn a more stable income, to achieve financial independence, and to contribute more to society. Earning higher levels of income is not all that is required to live a happy, fulfilled, and satisfying life, but it helps. The increase of net worth is a significant goal of many people. Why else would they invest in the various investment instruments? Like any other investment, investing in education yields a return in the form of benefits that can potentially expand as time goes by. When an investment is made in investment instruments, there is always the potential for loss – loss of capital or loss of the value of capital through inflation. We can hardly speak of a risk of losing human capital rooted in education. Although this is a discussion about education generally, I must mention financial education as individuals must not only learn how to earn and make money, but how to make it work for them as efficiently as possible for as long as possible. Financial education can make the difference between a lifetime of security and financial woe. The process of getting an education provides an effective means of success through networking as it allows students to develop relationships with each other that have the potential to create significant opportunities over time. Education creates opportunities for export through the potential it creates for individuals to sell their services outside of their home countries and to collaborate across borders with others. Individuals who are highly skilled or highly knowledgeable have the potential to earn premium income through the higher price that must be paid for the services they offer. Education is a prime riskmanagement tool. It reduces the risk of unemployment, insufficiency of income, and the making of mistakes with far-reaching implications due to ignorance or lack of skill. Education has the potential to generate significant capital gains to individuals who are able to leverage their knowledge and skills to gain good employment with correspondingly good earnings or to develop businesses that do well. Education pays dividends in the form of bonuses, which are paid by successful companies to the workers who play a role in the generation of good profits, and employees who are better able to use their knowledge and skill to be more productive and contribute more may earn aboveaverage bonuses. TIME MANAGEMENT Getting an education requires time at every level. Particularly for adults, especially those who work and study at the same time, time has to be carefully managed and balanced. There are risks, though, that must be managed well if families are to remain together while a family member is pursuing a course of study or training. Getting an education requires financial resources like any other kind of investment. When the cost is not within reach, individuals may choose to seek it where it is more affordable with all the attendant risks. The inability to fund an education with one’s own resources drives many to borrow to do so, a situation that calls into focus the matters of money management and debt management and questions around when a real return on investment can be expected to materialise. Fortunately, scholarships, bursaries, and student aid make it easier for some, but not the majority, and some financial institutions offer savings vehicles to facilitate long-term planning and saving for education. Like any other form of investment, education reliably gives good real returns over the long term. Individuals benefit as do their families and the society, which becomes stronger and is better able to continually build itself over time. n Oran A. Hall, author of Understanding Investments and principal author of The Handbook of Personal Financial Planning, offers personal financial planning advice and counsel.finviser. jm@gmail.com n ADVISORY COLUMN: PERSONAL FINANCIAL ADVISER
RkJQdWJsaXNoZXIy MTUzNTI=