Pain lies in repaying loans from the Chinese dragon

‘If you buy things you don't need, you will soon sell things you need’ - Warren Buffett.

We all know friends or family members who are extravagant spenders. They not only buy what they do not need, but they also do so in abundance.

They are always in the fast lane, patronising the choicest entertainment joints, wearing the most expensive clothes and perfumes, picking from the high-cost corner of the menu, and always on an acquisition spree. In the West, some are even put on counselling programmes for the malady called ‘shopping addiction’. All they want is to look filthy rich in front of their neighbours.

It should not worry much because this is a matter of preference, but then it affects the stability of the family unit and state of the children. One of the biggest fights in families is usually around spending priorities. The husband may want to upgrade the car from Toyota to Mercedes Benz while the wife wants a down payment for a mortgage or a plot. The difference in opinion will always spread to every endeavour, including what to eat and what schools the children should attend.

The confluence of reality and fantasy comes when borrowing is the option to finance this grandeur and exhibitionist opulence - because loans are never free. Only nations enjoy something called ‘grant’, but even that comes with some strings attached. The more you borrow beyond your means, the more you need to borrow to bridge the gap between your earnings minus tax, and the cost of your lifestyle.

Treacherous encounter

Often, the end result is a treacherous encounter with auctioneers and the police, and dodgy games with landlords. At this point, you might start selling what you need to finance the debts accruing from the purchases of what you did not need. You may also end up burdening your children and their children with repayments long after you are gone.

This is not to say that debt is bad; no, no! Even the richest people take loans, only that they may be more prudent in the frequency, objective and amount. Of course, some stole, others even killed, or just inherited from their parents. But the majority are those who put to good use what they borrowed. Meaning the business they set up or the venture they went for, paid off the loan or subsidised it with other incomes.

Tragedy is when you stop pursuing other forms of financing for your projects and survive on borrowing. You even borrow to pay part of what you borrowed the last time, often from the same lender. In Kenyan banking language, it is called top-up.

But there is a tipping point, when even the most generous and exploitative of lenders begins to see the saturation point – beyond which you will default and the relationship will burst, then the small print on the back of the application form begins to apply. If you take a loan for a project that isn’t entrepreneurial, like a village home or family holiday in Maui, you must have alternative means to repay it.

Application forms

In the application forms you can clearly discern the meanness of the lender and the extent to which they go to safeguard their interests in case of default. Some even want to know if you sweat at night or have lost more than five kilos ‘for unexplained reasons’ in the last one year. They have to be sure you will live long enough to repay. Alternatively, they insure the loans in case you slip into the hereafter before you have paid the last shilling.

In cases where the project for which you borrowed does not take off or pay back as expected, most spouses end up fighting because one will keep pressing the other to chip in or go for top-up, even if from their chama. In modern borrowing, there is no shame unlike long ago when drunken Kalenjin wazee would say arrogantly: "Bo ng’o ng’o (You don’t feed us!)!"

The worst thing about loans is when you go to a Shylock. They don't care who they lend or whether the project is viable. They are on lending sprees on terms worse than the pound-of-flesh seekers in Shakespeare’s 'The Merchant of Venice'. They will even come up with the project, financing, management, materials, labour and terms of use. They only let you own it in name!

Ladies and gentlemen, just remember I was not writing about someone you know, but a country called Kenya and the Beijing-based lenders. Those slanted eyes are not focused on feasibility but interest margins, repayment periods and other goodies to benefit their over-populated nation.

African countries are just pawns being used to fatten the colossal Chinese dragon. Sadly, we take loans as if we will never have to pay while watering the trees of corruption, extravagance and wastage of public funds as if we will export their fruits to the Middle East.

Mr Tanui is Deputy Editorial Director and Managing Editor, The Standard