Money & Adulting
When you hear the statement ‘The financial wellbeing partner for the new generation’, what comes to mind? I believe it’s an interesting tagline, because financial wellbeing is not a term that you hear often.
Money is the key that opens all locks.
~Welsh Proverb
When it comes to money, it’s easy to think in binary terms. You either have it, or you don’t. You’re either making it, or you’re not. But our relationship with money is more nuanced than that, and our money problems go beyond just being broke.
Let me show you how.
In Kenya, financial literacy is not a subject that is taught in our schools. And so all, and I really do mean all, adults who go through the Kenyan school system graduate from universities or colleges with no official financial literacy training. They go into the workforce and start making money without knowing how to handle, manage and grow their finances.
This study conducted by the Central Bank of Kenya show that of all the people living in urban areas, only 9.9% of them seek financial literacy from formal financial institutions.
So what we have on our hands here, is an ever-increasing population of young adults who desperately want to make it in life, but don’t know how to get started; who don’t know, for example, the difference between good and bad debt. And in the midst of the ever-increasing fuel prices, cost of living and a staggering inflation rate of 5.8%, it’s no wonder more and more Kenyans are finding themselves in really difficult financial situations.
Smack in the middle of a pandemic, something beautiful happened to me. I stumbled upon a space that allows young people to work towards ensuring we change this narrative- Impact Africa Network. I joined the Innovation Fellowship program at IAN as a wide-eyed, slightly naive, market research fellow, eager to become an innovation leader.
As a space that immerses young college graduates in an environment where they’re equipped to develop solutions for our continent, I got introduced to project Kuzah when it was just a rough concept, a name and a striking tagline.
At that point, the team itself consisted of just two people and I was the third lucky charm. I loved my teammates, I was slowly getting accustomed to this work from home situation but I was having trouble understanding what problem we were working so hard to solve. Luckily, we had access to mentors such as our founder, Mark Karake, who helped us unpack the magnitude of the problem, strategize how to attack it, and connected us with valuable industry experts who gave us confidence and direction in our mission.
The aforementioned statistics on the dire need for financial literacy in our country seems massive. But it doesn’t end there. Over the past 5 years, Kenya has experienced a boom in its fintech space. This sounds really good, prima facie, but if you interrogate this further, you’ll discover that other than Safaricom’s M-PESA, it’s the betting industry and the credit industries that are really prospering.
Now online betting is among the fastest growing transnational markets within the global financial system. All you need is a smart phone and web entry, and you can access just about any betting site anywhere.
But in Kenya alone, it is estimated that the annual turnover of sport activities betting is $20 million or KSH2.1 billion.
Moreover, studies show that 70% of gamblers lose their stakes placed on bets and at the end of the day, the house always wins. But guess who their primary target market is; the youth.
There are promises of wealth and quick riches littered all over betting advertisements, but if you’re thinking these companies have your best interests at heart, you’re wrong.
The short-term lending space has also been booming. At the moment, there are well over 100 lending platforms in Kenya, and they offer loans or overdraft services of up to *and you can hold your breath for this*, 395%p.a. It’s insane. Let’s put this into perspective.
The current prevailing interest rates on loans offered by banks is 16%, 12% for Saccos and Chamas, and usually, the faster you pay off these loans, the cheaper they are, because you won’t accrue massive interest payments. But how some of the short term lending apps work is that they charge a servicing fee of approximately 17%. Which means, whether you clear the loan in a day or in a week, or in a month, you’ll still pay that extra 17%. It doesn’t look bad at first. But consider the life of an ordinary youth, who’s hooked to these platforms and takes out at least one loan and pays it back every single month, in just one year alone, depending on what platform they’re on, they’ll have paid back over 200% in interest rate payments alone.
To give you some more perspective, if this young person borrows KSH 5,000 from this lending platform every month for a year, at the end of the year, he’ll have paid back an extra KSH 10,000 in interest payment alone.
The thing that really bugs me is that these loans are masked behind really smart marketing campaigns claiming to set you free and the platforms themselves are gamified, a psychological trick that makes you believe that you’re receiving a favor when your loan limit is increased. But I’d like to draw your attention, once again, to these astronomical interest rates. Guess who the primary target market for these products are: The youth, specifically, middle to low income earners.
Since the short-term lending space began growing exponentially, the number of Kenyans negatively listed in the CRB has grown to 11 million out of a total population of 30.3 million adults. That’s to say, if you randomly put 10 adults in a single room, 3 of them are likely to be in debt. On top of that, of all the loans borrowed, 16.6% of them are taken to offset other loans in a borrow Peter to pay Paul style. That’s a sign that many people are living from paycheck to paycheck and are stuck in the cycle of debt.
Between products in the market out to take from the youth, the increasing levels of unemployment, taxation that burdens new upcoming businesses and the ever increasing cost of living, it becomes immediately clear that the financial wellbeing of the ordinary Kenyan men and women is not a priority. It is just so hard to make it out here. And so many young people will agree with me when I say that adulting is a scam.
But adulting shouldn’t feel like a scam all the time. We shouldn’t spend all our working hours thinking of how to survive this harsh existence financially. This systemic problem requires a systematic solution.
That’s exactly what Kuzah is. A wholesome solution to this.
Before you start investing your money, you need to save your disposable income first. Before you start saving, you have to learn how to plan and organize your life and finances so that you have some money set aside for this specific purpose. We call that budgeting.
‘Doing well with money has little to do with how smart you are and a lot to do with how you behave.’
Morgan Housel, Author.
And before you even get to this, you have to understand why it’s important to do all these things in the very first place. Why not go break your bank at some random high-end lounge and win the love and respect of complete strangers? Why does it matter what you do with your money at your age?
How do you move from being a short term thinker to a long-term strategic planner? How can delayed gratification help you become more successful in life? Kuzah starts by offering a 6-week financial literacy (FinLit) program with the kind of content that challenges how you think about money and helps you figure out how to make money for you. And why shouldn’t it? After all, you work so hard for it.
We’ll then couple this up with a savings and investment platform that will reinforce positive financial behavior.
So say you came to class and you created a monthly budget that allows you to save at least 20% of your income, the savings and investment platform will give you a way to actually practice what you’ve learned and start saving. And guess what, that money will actually earn you favorable interest rates.
Lastly, (and this is my personal favorite part) we wrap all this up with a community that brings young, vibrant people together to have conversations and share their experiences. The idea here is that so many people know what they’re supposed to be doing with their money, but without an accountability system, or at least a group of friends to help you stay on track, it’s so easy to fall off that bandwagon.
So the Kuzah community does that. We have very real, very candid conversations about everything from investing, careers, entrepreneurship to relationships and money. Basically all the things we need to figure out so that we can do this adulting thing right. This helps us to find solutions to our problems, eliminate stress and empower ourselves to live our lives of purpose.
So, if you’re reading this and you’re a young person who feels that adulting is a scam because you weren’t adequately prepared to handle the world, you should know that your financial wellbeing is at the heart of what we do here. This earth is hard. But we believe that there is so much more to life than just worrying about money. And we want to help make financial freedom a reality for you. So let us. Join Kuzah today.
