Lending institutions, healthcare and human capital are among the major determinants of economic development in developing countries. A lending institution is a private or public financial organization, which gives loans to different borrowers in the economy. Examples of financial institutions include banks, finance companies and credit unions. Health care, on the other hand, is concerned with the well-being of individuals in both physical and mental aspects. It involves the management procedures taken to ensure the good health of a human being. Human capital refers to intangible assets posed by individuals in terms of acquired skills and knowledge. It is used in the creation of economic value in order to benefit oneself, the organization or even the economy as a whole.
The growth and development of a developing country largely depends on the three items mentioned above; lending institutions, health care and human capital. Though there is no single definition of a developing country, it generally means a country that is not industrialised and mainly depends on imports, exports semi-processed products and relies heavily on international aid. A good example of such a country is Somalia in Africa. The lending institutions in Somalia are few and underdeveloped, and this situation slows down the growth of the economy. The lending institutions in Somalia consist of mainly of commercial banks and most of these institutions are privately owned.
Another main component of the economy is health care. The health care system in Somalia is currently ranked as being among the worst in terms of health care standards in the Sub-Saharan Africa. This is because of the vicious cycle of poverty, constant famine and civil wars. However, there has been a remarkable improvement particularly in regions where security and peace has prevailed. For instance, there was the construction of thirty hospitals with the help of foreign aid and non-governmental organizations.
The human capital is underdeveloped due to lack of learning and training institutions. The country lacks adequate skilled and experienced labour force. The literacy level of most Somali people remains low. This is mainly because of few public educational institutions. In addition, the curriculum does not involve a lot of technical training and professionalism. As a result, there is lack of proper human capital.
Funding from the World Bank and International Monetary Fund has had both positive and negative effect on the socio-economic and political development of Somalia. With the positive gains comes expensive costs and hence the negative effects which outweighs the positive effects. The IMF offers loans under strict conditions. These policies have worsened human capital and environmental standards in Somalia. The World on the other hand is known for funding big development projects in Somalia and this has led to Somali’s consistent debt crisis and there it cannot develop economically because it is forever in debt. For instance, in order to qualify for such loans, a country has to agree to a pre-drafted agreement handed to the Minister for Finance when he or she is requesting for the loan.
One of the common requirements is trade liberalization which has more negative effect on Somalia’s socio-economic and political development than the positive one. For instance, trade liberalization leads to dumping of substandard cheap goods from the developed world. This undermines the infant industry in Somalia and hence a fall in economic development. Privatization is another World Bank programme that affects Somalia negatively as public enterprises and undermined and yet most citizens cannot afford the private sectors because the prices are not subsidized. In Somalia, a large percentage of schools and financial sectors are privately owned.
Lack of a healthy population in Somalia is among the reasons for underdevelopment in Somalia. A population that is physically and mentally healthy will improve Somalia’s economy in a number of ways. With a healthy population, there is availability of labour that is both skilled and unskilled labour and with more human resource, production increases and hence increase in national output and as a result increase in economic growth. Secondly, a healthy population means less usage of the country’s resources in health care. Such resources can be diverted into other productive use and an improvement in the economy.
Another way by which an economy is strengthened by a healthy population is through faster growth of the economy. This is so because a healthy population is more productive than a population that is not healthy. A healthy population produces more quality and more quantity of goods and as a result the economy growth increases. Furthermore, a healthy population means there is better training of personnel. This is because an unhealthy population cannot be trained. With better trained personnel production is high. Consequently, there is an increase in economic growth.
In Somalia, the government has really worked hard in ensuring that there is the presence of foreign aid. This can be seen by the fact that there are very many foreign organisations that go to Somalia for different reasons. For example, building of the hospitals by foreign governments and non- governmental organisations such as Medicine Sans Frontiers of France, provision of food by some non- governmental organisations such as the united nations, provision of outpatient dispensaries in the rural and nomadic areas and vaccination campaigns against some infectious diseases affecting Somalia have been conducted in most areas of Somalia with the help of the United Nations.
In a nut shell, robust lending institutions, an effective health care system and availability of skilled human capital are very important in ensuring economic growth and development for any developing country. However, the situation is not the same for Somalia due to persistent warfare over the years.
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