In the recent past, the media has drawn attention from the Iraqi war to saddening stories about Africa- AIDS, poverty, corruption, joblessness, malaria, low literacy levels and the inhuman acts like the one recently experienced in the Turbi region of North Eastern Kenya. This comes at a time when the leaders of the G8 Countries just concluded their meeting in Scotland to discuss the debt write off for the poorest nations in Africa. It also coincides with Bill Clinton’s visit and his anti poverty and malaria campaign ahead of his global summit in the US later this year.
Sadly though, our leaders are still inclined to the same old ways, with the economic prospects orchestrated as before and no signs of a turn around. The poor seem to get poorer while the rich get richer. At one time, poor rains have been blamed for Africa’s current situation, and seldom the systems that are in place. Perhaps you may wonder; is Mugabe’s action on white farmers right, or Gadaffi’s message to African nations to “stop acting like beggars”? You may wonder if it’s right for Africa to close doors to western imposed measures and billions worth of aid.
I firmly believe that Africa’s problems are here to stay however; the solutions are with us paradoxically. We do not need to live on stories of the number of people living on less than a dollar a day, or how we are under developing due to reasons that beat logic. Clinton, while speaking to Richard Roth of CNN’s Diplomatic License explained why he strongly believes that Africa can change. Africa needs leaders who are ready to rally change while working together for the good of their nations. Blair too has a dream, but more inclined to debt cancellations and offering of fresh debt. Laura Bush too has something for the Africans. Her tour of Africa entailed creating awareness on AIDS and might have been seen by many a success.
As much as the West wants to assist, their approach is reactive rather than proactive. They only come in when disaster strikes. Clinton, in his interview, explained a different approach as the day of his global summit nears. Before the summit, he plans to have empowered leaders from developing countries to come not as seekers but people who can question those from developed nations (playing equal partners in the development agenda).
Back to the African commons, peasantry doesn’t have to dictate the day today life. The aid, or bribe to vote does not have to determine the life that they lead. Left out are the sure factors of development: education and access to credit. Originally, the concept of micro finance entailed financial education for the low-income groups. People went to micro finance enterprises because they knew that it was only at such institutions that they would be listened to- and not the commercial banks where they stood the chance of being ridiculed. They would not only get the loans they desired but business incubation. Although the ensured the money back guarantee for the loaning institution, there was no sure way of ensuring the going concern of the business. That explains the sudden rise then fall of the micro finance concept in Africa.
Poor people in developing countries share the same problems as those in developed ones- they all have a longing for economic security for themselves, their families, and the young. Many of them talk about change and wait to see it come in their everyday life. Unfortunately though, they only have a handful of opportunities at their disposal. Their creativity exposes them to all sorts of ideas, which they ponder upon and after consideration, always go ahead to make good use of their skill. However, proper money management is always in deficiency.
For the poor, good money management is a daily challenge. Pressures on their cash flow are persistent and often urgent. Whereas many envisage an expansion plan, the existing struggle to make ends meet, makes it impossible to separate the business entity from the family. On the saving end, they have done everything through trial and error leading to a complete disorientation. At one time, it is the merry go round that works while at another; it is the micro finance, the safes at home or tangible assets. That is why financial education will believably do a lot of good.
Financial education has a role in building the capacity of the poor to gain control, become pro active, use information and resources to enhance their economic security and more effectively use financial services. When informed, clients become better consumers of financial services and financial institutions benefit.
People who receive financial education are able to use money more wisely other than seeing it as a means to an end. They also have the capacity to more effectively use financial services. Today, many parents hold different beliefs if told that sending a son or daughter to school would reap any benefits in the long run. Compare this to the Chinese who have recently discovered trade in blood at hospitals to afford college fees. The expression in most of their faces is “investing in children is a guarantee of future security. Educated, the poor would have increased self-esteem and incremental successes in achieving financial goals and greater ability to demand high quality products and services from their financial institutions.” A young entrepreneur recently explained to me an ordeal of his transformation. He previously operated a small kiosk where he barely had a mark up of $2 a day. After joining a Micro Finance group with K-Rep bank, he is a happy owner of a small retail business whose mark up has increased by over 200% to stand at $5. Through the group, he has learnt the concept of value creation and borrowed a more sustaining loan and his business is now bigger.
As much as the institutions may do this, it can only be more successful if it becomes more focussed on the aspect of financial gain on their side- training to empower and not for people to get the loans. In doing so, they will retain the existing clients, attract more and gain better knowledge on the market to use in improving products and services.
According to a research conducted on three continents by the Citigroup Foundation under Micro Finance Opportunities Financial Education for the Poor Project, it was found that a consistent demand for money management, debt management, managing savings, financial negotiations and use of bank services. Financial institutions however stress on the use of their services, an approach with a lot of bias. True as this may be for marketing, financial institutions need to advocate change and only have it last but not everything there is to know.
Efforts by three Asian banks (Al Amana, Pro Mujer, Sewa Bank and Teba Bank), have defined what financial education entails and what it can do. These banks engaged citizens in a financial literacy campaign whose participants were poor workingwomen. Contracted university students and loan officers conducted training. This was a great success and has left the people better than they were. The concept is however not totally out of way. A forum organized by the Africa Resource Bank and the Inter-Region Economic Network seems to be preaching the right message in the right way to the right people. After conducting a six-month research in a Kenyan subsistence farming area- Machakos, the think Tank has brought players in the agriculture industry and will now not only empower them through the forum but also introduce them to the resource they need to move forward.
This to me is a concept which if rescaled could entirely change Africa. Our idea of banking should not be the six-digit loan from a commercial bank, huge amounts of collaterals, having a banker take 17% of your money and you lining in debt for as long as the bank wants. There is greater success in embracing financial education and worthwhile credit. Is your banker serving you right? If yes, you are truly a rich man, because the poor have no bankers.
By Michael Musau
CEO Emerging Africa Capital
Licensed by The Capital Markets Authority as Investment Advisers
Comment on this article!