Borrowing and Saving: Which Way?

Published on 3rd February 2009

How does one get a healthy cash flow? There is only one answer: invest, invest, invest. However, how one gets the funds to invest is subject to debate. Do you save or do you borrow in order to invest?

Some people are against any form of debt. They assert that one is better off staying away from debt. They cite the fact that borrowing money to invest was the major cause of the stock market crash in 1929, and the ensuing 10-year depression. They even claim that it may be the cause of the current credit crunch threatening the world economy. If you borrow to invest, what happens if your investment goes under? You would end up in debt without an asset. It is thus better to invest your savings for in case of loss of investment, you will not be in debt.

Borrowing, however, has an important part in the economy. Borrowing has built empires over the years. Some investments require a considerable amount of capital. An entrepreneur may see an opportunity but may neither have enough savings nor want to risk all of his/her savings. In such a case, borrowing comes in handy and hence borrowing to invest can’t be ruled out.

Both borrowing and saving have played a major role as sources of investment funds in Kenya. The Savings and Credit Co-operative Movement and most recently the microfinance boom in the country have facilitated borrowing and saving. In these two institutions lies the answer on whether to borrow or save to invest.

Borrowing and saving to invest should not be looked at as mutually exclusive.One can save, borrow and invest at the same time. When my mum and dad joined their jobs as educators, for example, they both joined the SACCOs of their choice. They have managed to accumulate savings as they borrow to finance projects and investments such as building a house of their own and buying rental property for income generation. This is evidence that both savings and credit are important to achieve financial security and prosperity. No wonder, micro financing has been hailed as one of the breakthroughs that will help eradicate poverty out of Kenya and the world as a whole.

The power and importance of savings cannot be over emphasized but prudent borrowing is also as important. Kenyans should therefore save and prudently borrow to invest.


By Anthony Kiarie Keru, Strathmore University

An essay presented during the Postbank-SIFE Kenya Essay Competition held in Nairobi Kenya on 24th January 2009.


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