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Career Circles – 2

by wakinyi
written by wakinyi

Amidst shrinking opportunities comes what most of us have heard many a times – the power of networks – or otherwise referred to as connections. I usually have a problem with the word connections. The many or rare occasions I have heard it used, it gives the connotation of ‘using influence to gain opportunities or favour.’ And yes – there is some level of truth behind the misconception. But should this always be case? I do not think so. I think that connections if well used can and should open genuine doors that you wouldn’t otherwise have known about but if you did the probability of getting through are close to none. Connections are not necessarily about asking for preferential treatment or advantages – but rather being given the platform to be seen through the door so you can prove that you deserve to be inside in the room. There is something special about networks which is the tendency to associate with or want to work with people with whom you have built trust. It is human nature to trust third parties within our network in the hopes that birds of a feather flock together, than go scouting for trust from complete strangers.

I am one of those people who prefer to hit a contact and find out what an opportunity is all about. I find it as being strategic rather than ill-intended getting an upper hand. There are situations, at least in my experience, where you miss out on great opportunities because you simply never knew or heard about them early enough. A regular catch-up phone call could have easily given you access to that information. While it is good to give everyone an equal playing field meaning nobody gets an upper advantage because they knew somebody within a network – I also believe that it is good to reach prospective outstanding candidates and encourage them to submit their applications for available opportunities. It is easier to have a few strong proposals than hundreds of irrelevant and sometimes displaced applications. Let’s face it, sometimes we submit applications for opportunities that we are not qualified for because it gives us hope in knowing that our records exist in a system somewhere and anything could happen.

While I am a strong believer in the power of networks to provide firsthand market intelligence, I have recently come across networks – who either due to a misunderstanding of connections or genuinely out of bad experiences are very unreciprocating when it comes to leveraging on network referrals. It could also be out of fear of risking own reputation, as I gathered from a friend who mentioned that nobody wants things to go wrong and be blamed for having made the referral.  This rings a bell of a recent experience in which a network was contacted with the aim to recommend a candidate for a role because the candidate matched the profile and had strong skillset. There was no malice or special favour intended in the referral move.  However, the impression gathered by the recipient was that their network was asking for a special consideration outside meritocracy – which is the exact word that was used in the conversation.  This was quite embarrassing and bruising. Because the referee happens to a be a person of honor known for upholding integrity. So much that they would not go out of their way to make non-merited references if they had no first-hand experience of the ethics and quality of work output of the party they are recommending for due process consideration.

Caught up in the above discussion, I was unsure of the advice to give. I am person who equally believes in competency-based offers rather than rewarding cronies, it doesn’t matter how close or powerful the subject is. So, when a network gives you a reply to insinuate that you were seeking preferential treatment, it makes you question yourself endlessly. For example, has your sense of integrity failed the moral test? Has your understanding of how things should work in a transparent world been wrong all along? Is the world too corrupted that it is no longer possible to make genuine referrals, so bad that if you tried to nominate or mention credible resources – you are seen as the propagator of rotten eggs within the broken system? I am usually of the opinion that there is no need to pursue a rigorous but blind process if there is room to make use of well researched or justified minimum shortlists – it saves everyone the human and commercial resources while enhancing process efficiency, if you ask me. Is it always the right thing to do? Maybe or maybe not – but if transparent and backed by institutional policy – then there is no harm in doing so. I also believe that time and space define a lot of things but are often overlooked.

With or without ‘connections’, outstanding talents will always shine at the right time or space. Networks help to enhance the visibility chances which is not a bad thing and should not be regretted or be considered as embarrassing.

Networks exist for a reason, and it doesn’t hurt to reach out and make inquiries that do not amount to collusion or seeking advantageous information. Networks are valuable to the extent that we make them work correctly. For as long you are not gaining any special treatment or favours, it is okay make referrals of great experts or service providers. You have a first-hand experience of their performance or delivery standards and can therefore articulate their competency better than expecting a computer-based algorithm to run through and pick the best candidates. Human intelligence will always remain smarter than we think or imagine – nothing – not even artificial intelligence can replace that.

Until the next post, happy moments leveraging on the power of your networks without getting it twisted.

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Nuggets of Wisdom 3

by wakinyi
written by wakinyi

I stepped out on some errands a while back. I needed to do a few repairs around the house and called a plumber to accompany me to the hardware store to confirm we bought the right materials and fittings. He has served us for many years – talk of customer loyalty, or maybe it’s a rigidity to change. I always prefer to work with the same service providers and do things the same way unless a change is very necessary. That’s just who I am.

As we went around searching for the items we needed for the repairs, we noted that most stores were already winding down as it was nearing the end of year. Some had limited stock. It was therefore a bit of a struggle finding everything at one stop. It was in these moments of walking around from one dealer to another that a conversation sparked up. Most of the dealers we visited would tell that they did not have what we were looking for. At some point I got tired and asked one of them, “do you know anyone else who might be having this item?” The response was a cold no.

As we walked away, frustration slowly creeping in as we seemed to be spending too much time trying to locate a certain item, the plumber said,

If we were in the CBD, we would have found and bought all these items in a very short time.” He went on to say  “I like shopping there because even when a merchant doesn’t what you are looking for, s/he will either advise you on who might, or even go ahead to go search for the item a nearby shop as you wait at their shop because they don’t want to lose you as a customer.  If they find it from a competitor, they will simply add a small mark up to the competitor’s selling price and quickly come sell it to you. Traders are therefore always busy selling either their own items if in stock, or those of their surrounding competitors – provided everyone makes a few coins to carry home at the end of the day.”

As we kept talking, it dawned on me that indeed, there have been a few cases where I visited the small informal traders within Nairobi CBD environs and experienced this kind of ‘hospitality’. I specifically remember an electrical outlet which I grew fond of – because the owner would always offer me a seat as he stepped out to look for items if his shop did not have them in stock. He would buy from other traders and resell; he was fine making a few coins than nothing at all – I assume. As a customer, I was happy to get what I needed without wasting too much time visiting several shops, provided the buying price was within my budget, I could live with that.

It was strange that on this side of the country, traders were not as open-minded as the ones in the CBD. They were not willing to step out and find a product for a potential buyer. To them, business meant selling what I have in my own shop, period.  They were not interest in finding out if their competitors could become their allies or associates when opportunities arose.

While it is generally healthy to have competition, I am a strong believer that competitors can also work together for everyone’s benefit – customers and business enterprises. There is a street in a certain town I once visited which had several Asian hardware shops. I would later learn that most of those shops belonged to the same proprietors –in one way or another.  They were part of a family business chain – presenting as competitors yet deep down operating as allies who had mastered the power of going separate ways while uniting to ensure business continuity.

In some jurisdictions, bringing business competitors to work together is discouraged for risks of potential collusion that might hurt the overall trade environment. I however think that sustainable business growth could look a lot better if things were flipped a bit. Competitors merging forces where necessary can do good, if you ask me. And by this I don’t mean in the sense of industry associations lobby groups – but actual allegiances that put the customers service first. For example, we are increasingly seeing aggregation especially in procurement, transport, storage and logistics, but also in the built environment business.  But back to today’s story, the experiences of small traders in Nairobi’s CBD environs who go the extra mile to find a product just so their clients are served is a good example of how competitors can act as allies. These traders know that making a few coins today through a competitor is better than shutting doors by simply saying no to a potential buyer. They will make referrals to other dealers without hesitation because they understand that there are good and hard luck days for any business. By making a referral today, a competitor will be kind enough to return the favour (although not always the case) and refer clients to a fellow merchant for items when opportunity arises.  You may argue that small businesses versus large traders face different hurdles – and therefore their competition scripts cannot be comparable. I am of the opinion that the basics of any operation will always apply, anything however big has a unity start point

Until the next post, happy reflection on what value competition adds and converting rare moments into allegiances for personal or business growth. 

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financial literacyinvestments

ABCs of Money – 3

by wakinyi
written by wakinyi

The emergence of savings and credit cooperatives (SACCO) societies in Kenya is undoubtedly one of the major vehicles that have been used to drive economic progress and individual’s development. The history of SACCOs in Kenya dates back to 1908 when the first cooperative – a Dairy Cooperative, was established. Over a century later, there exist hundreds of SACCOs offering membership a wide variety of products. They have gained even more momentum in the later years due to their fair and stable interest rates relative to commercial lenders. SACCO products vary from one entity to another and may include emergency loans, development loans, education loans, motor vehicle purchase loans, children’s savings and holiday savings.

The basic principle governing SACCO operations is that members get access to credit facilities whose qualifiable maximum is usually calculated based on the individual’s total deposits or shares. In other words, the lower your deposits or shares, the lower the amount of credit you can access in the form of loans. While some SACCOs, especially the deposit taking ones (DT) allow self guarantorship tied to your deposit base or use of a separate collateral e.g. land title deed, others adopt the rather controversial third party guarantorship where a loan applicant must seek guarantee from fellow SACCO members in good standing. A default in servicing of the loan automatically implies the loanee’s guarantors would bear the risk burden. I have seen work relationships and friendships destroyed by this last model, so it is something to be very careful about before committing to become anyone’s guarantor. Better to be safe than sorry.

The primary function of a SACCO is to offer members alternative or easier access to credit. I say easier because those of us who have never held a long-term work contract know the persistent struggle that comes with trying to convince commercial banks your creditworthiness when you live off a contract that runs up to a year at best. SACCOs have always been our refuge in such cases.

To reap the maximum benefits off a SACCO or when deciding whether to join one or not, the determining factor should not be pegged so much on how much dividends it pays out every financial year – which is something to be keen on when looking for an appropriate money market fund for example. This is because while dividends earning is good, it is not the core business of a SACCO. It is rather a bonus that comes with patronizing of products by the membership. What this means is if you set out to join a SACCO with the sole intention of saving only but not borrowing, then you are not doing it justice and should probably choose another saving vehicle such as MMF. In short, there is no business case for a SACCO if members are saving but not borrowing from it or borrowing but not servicing loans (defaulters).  That said, the true benefit of being part and parcel of this vehicle comes when you as a member learns to leverage the products it offers you in order to develop yourself sooner rather than later because a delayed investment might be a wasted opportunity.

I recently had a conversation with a friend who relents SACCOs and mentioned a preference to save until they have enough to invest. While this is not a bad idea – in any case nobody wants to live a life servicing loans. But more importantly, we all have different preferences which must be respected. My biggest concern, however, is usually how long would it take to save enough to make a significant investment? Probably a lifetime? We then have to ask ourselves whether it would it be worth it to wait until our sunset years to finally invest because we have finally saved enough? Not too wise a choice if you ask me. Imagine a world where investors waited to save enough. Think about it in terms of the impact on global economies. Imagine if governments waited to collect enough revenue off taxes to roll out major development projects. How long would it take to have sufficient funds and projects which can generate the kind of opportunities that would push a country’s GDP growth rate forward significantly?

With the common understanding of the primary or core business of SACCOs, I would like to share thoughts on the hottest topic heating airwaves in Kenya this Q1 in relation to SACCOs.  This follows the scandal at KUSCCO, the umbrella union of SACCOs for whom a forensic audit by the Ministry of Cooperatives revealed gross mismanagement and financial irregularities that will now cost affected SACCOs and by extension their members provisioning for losses worth at least Kenyan shillings 1.8 billion in the FY ending December 2024. I recently attended an AGM in which the whole day arguably turned into the KUSCCO ordeal interrogation affair. Members wanted to understand what went wrong, why the management allowed it, who will be held responsible for the poor investment decision of taking their deposits to this now infamous umbrella body, whether there is any assurance that members’ funds will be recouped at some point and when exactly would that be. The mood in the room throughout the day was sombre – the last time I encountered such agitation was in 2018 at a different Society where then compliance to the newly introduced International Financial Reporting Standard (IFRS) 9 ‘took the blame for the losses recorded’ in the financial year ended 2017 – in fact no member took home any dividends. While the IFRS effect was out of control back then and probably more justifiable since it is an issue of global compliance, it is difficult to imagine how the recent KUSCCO fraud happened under the government watchdog and SACCOs regulator SASRA. We can only hope that this matter will be brought to book. In the meantime, thousands of Kenyans who opted to accumulate their savings via SACCOs with an expectation of ‘return on investment’ post AGMs in Q1 as is the norm annually, may now have to make peace with taking home fewer coins or nothing at all under worst case scenarios.

Having found myself on both sides of the boat – one where you literally earn nothing – and where you earn the maximum return possible in that financial year, I have learnt over the years to internalize what it means for me as an individual to be part and parcel of a ‘financial vehicle’. This means being clear on what my expectations are from the onset. In the case of SACCOs, I treat them for what they truly are – a means to gain access to credit which un-bankable individuals like me would otherwise not qualify for under traditional commercial banking system due to the erratic nature of our income.

With that clarity in mind, I will re-emphasize that earning dividends on deposits and shares in a SACCO is an additionality. On the flip side, reaping nothing should also not be a major cause of alarm if the SACCO fulfilled its primary functions to its membership effectively. This is not in any way to water down the genuine need to bring to book the culprits behind the scandalous mismanagement and gross embezzlement of billions of savings deposited by honest and hardworking Kenyans through their parent SACCOs. It is to say that even as we unite to demand for justice and accountability, let us not lose sight of the core objective for why SACCOs were originally established. They are not and should not be used as an investment vehicle as many people now perceive them to be.

As we keep an eye on how the KUSCCO scandal unfolds, I have little faith that much will be salvaged – if the current rampant national corruption status quo is anything to go by. However, we can use this circumstance to learn and have clarity when choosing financial vehicles in future. Some of the basic questions to keep at the back of your mind may include: Why am I tucking away this money?  What do I hope to achieve as a result? Where should I put it in relation to the why and what? Who is the custodian? How can I spread the risk? When is best to spread it?

Lastly, is it important or useful to become a member of a SACCO? Yes, I think so – subscribe to at least one. And you don’t have to be making ‘a lot of money’ to be a viable member. Just like MMFs, there are several options to suit diverse financial or income bands. I believe with KES 500 bob or even less monthly; you can already start saving your way to facilitate access to development loan or other credit facilities. The trick is to find what works for you, it could be in terms of shared culture or mutual friends/colleagues – especially where subscribing to third party guarantorship schemes.

Until the next post, happy decision making on your savings and credit access options!

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ABC of Money – 2

by wakinyi
written by wakinyi

This post has been inspired by recent discussions with a group of friends – you know who you are! A shout out to you all.

If you ask me, money market funds (MMFs) are probably the easiest but obviously low return ‘investment’ vehicles that take care of risk averse people like me. When it comes to personal investment, I do not consider a money market fund as an investment per se – rather as a safe place to keep your money (asset management) as you decide on what/where to make the real investment. A MMF is also a haven for emergency savings while still taking advantage of the time value of money – even if returns are minimal. After all, isn’t it better to have a dollar today than have it tomorrow? MMFs are often recommended for their superiority relative to money lying idle in a bank current account, or a saving account where it earns a lower interest rate.

Earlier today, I was doing a bit of research on the performance of MMFs in Kenya and got reminded of the fact that not everyone is as knowledgeable or even aware of their existence. I was particularly reminded of a conversation with a younger colleague mid last year. Let’s just say this person was excited to learn about MMFs via a random lunch hour conversation. I could see beaming in her eyes and knew she was a button away from saying good-bye to traditional savings account or idle money in a current account. I also realized that many young people might be unsure of what to consider when selecting their preferred money market fund.

Getting started on your first money market fund? Here are a few things to consider:

  1. Minimum deposit and top up amount: Depending on your pocket size, you will be eligible to open some funds but not others. There are funds that require a minimum deposit of as low as KES 100 while others are in the range of KES 1 million. If you have already ticked boxes on which fund to go with, but the only barrier is the minimum deposit required, it may be worth giving yourself time to save via a lower minimum deposit and top ups MMF until you have sufficient funds to transfer into your preferred option.
  2. Purpose of the money market fund/Ease of withdrawal: For me this is important, and I would probably consider if first. As mentioned earlier, when it comes to personal finances, I view a MMF as a place to retain the time value of your money in risk aversion. Or it could be a place to keep emergency funds from which withdrawals can be done as quickly as possible when the situation arises. Most MMFs offer withdrawals of between 24 hours to 3 or 4 working days. As we know, emergencies can require an even shorter turn around.
  3. Is there a withdrawal limit? Some MMFs limit how much money you can withdraw at any time – either via mobile banking e.g. M-PESA or bank account. I think this affects mostly those who are transacting in the minimums of KES 50K (via mobile) and KES 300K (via bank). If your anticipated withdrawals are below these ranges, don’t worry yourself too much about this as a determinant of where you go.
  4. Individual, group or corporate account? Depending on which option you are keen on, it may be worth checking whether the preferred MMF is giving you room to do that. For example, if you wish to operate a group MMF, there is no point considering funds that cater for individual or corporate investors only.
  5. What are the customer reviews saying? You will not always find information relating to clients’ feedback online. However, should you be lucky to find people who have posted their views – although this can be subjective, they are your best chance at finding first-hand information to ensure you are not getting yourself into a bottle of frustrations when it comes to withdrawals or user interface. For example, most MMFs have a mobile app so worth finding out if it operates seamlessly and such reviews can be found in the Appstore. But I don’t think this an all too important point to consider especially if you are not going to be a regular with transactions.
  6. Effective yield of the fund over a period: I think this is important because a MMF should not be confused with shares trading not unless you are aiming to bounce finances in between various money market funds within a short period of time, say quarterly or monthly. If you are keen to reap in a longer-term vis-a-vis earning compounded interest from a traditional savings account, you would be keen to review the annualized, 3-year and 5-year rates of return. The intention is to understand how the fund has performed over a longer period, rather than instantaneously. MMFs are expected to disclose such information for public knowledge, so if you find one that is being ‘caged’ about it, think twice.
  7. Who is the fund manager? This is not an all-important point but to me it does matter. You do not want to have your hard-earned money under management by unknown institutions. I think some individuals or corporate investors go a step further to conduct due diligence on the asset managers, especially if putting in large sums of money. The fund manager’s historical performance also gives an indication of how much time is spent in portfolio diversification, to ensure the money reaps the highest possible returns. On the flip side, a renowned or superior fund manager might also be lazy because of the assumption that they are already trusted by the market. You may notice a huge MMF, in terms of asset base, recording weak annualized performance compared to the new kids on the block who are barely known.  End of day, it should be assuring to know that one can never lose the principal capital because fund managers are by law regulated. In Kenya, this regulation is done by the Capital Markets Authority.  The worst that could happen is investors earn no return on capital. But you can never get less than what was ploughed which is the risk averse advantage that MMFs have over shares trading.
  8. Management fees: For me this is not that critical if you don’t have a huge capital base. So don’t get yourself too worked up if you are just getting started with a few bucks to your name. The headache is not worth it. What might be worth considering is the withdrawal charges. If you are operating a MMF with intentions to make regular withdrawal, then withdrawal fees would be something you want to take a keen eye on. Most MMFs in Kenya charge a management fee of between 1.2% and 2.5% p.a.
  9. How long has the fund been in existence? To some people, it does not matter when a MMF was established provided the present returns are lucrative. If you ask me, the inception year is worth looking at if you are extremely risk averse and wishes to use a stable fund. How long a fund has existed says something about its stability, although not always. For a fund that has been there for a longer period, there is the extra advantage of checking its historical performance (effective yield) and make an informed decision. This is not to say we should avoid the new kids in the block who are giving double digit returns, weigh what works best for you.
  10. Diversity in investment portfolio: This reminds me of a heated discussion last year in which the discussants were infuriated at why a company was investing in the same set of products, yet the market performance over the past 5 years was on the negative scale. MMFs typically invest in government securities, fixed deposits, and corporate debt. Hence the portfolio is a bit limited. However, good to keep an eye on how an asset manager is diversifying the mix within this limited portfolio. For example, a fund that has invested in too much GoK securities at such economic times might be worth scrutiny if you are putting in a lot of money. Never know!
  11. Does the MMF exist in other currencies? Okay, I don’t think this is for everyone. But it kind of matters. Some funds have both the Kenyan shilling and dollar MMFs. This factor is worth considering if the current unprecedented depreciation of our local currency is anything to go by.

See below my summary analysis of a few MMFs in Kenya. Also feel free to check out this link on Vasili Africa analysis of top 15 performing MMFs as of December 2023.

Author summary information on select MMFs in Kenya

Until the next post, have yourself an informed excursion on which money market funds to opt for!

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financial literacyinvestments

ABC of Money

by wakinyi
written by wakinyi

I decided to pen down a few things about expenditures tracking. This came up as part of a discussion with a group of friends over the holidays. And so, I thought why not share with my readers?

You have probably heard it said that tracking expenditures keeps you on track in as far as money habits are concerned. If you ask me, I think money can be such a difficult commodity of trade. You wake up today with an account full of cash, and tomorrow you are probably running an overdraft on the same account. And this can happen easily, especially for those who have mastered the skill of ‘burning cash’. Yes, there are people who know how to spend, and do it very fast. And I don’t think spending is at all a bad thing, for we cannot live without expenditures. There must be a cycle of earning, saving, investing, spending, order notwithstanding. What really matters is where we draw the cap.

A few months back I was jokingly telling an acquittance how I was so broke. I had never been that broke even during my college years when some of us had to live on government education loan and gifts from well-wishers. Yes, the cost of living was slightly cheaper at the time, but there were always competing expenses that required attention. You know how the life of a college student can be, especially when you decide to be a bit adventurous with travels or shopping escapades once in a while – which is also not a bad thing provided you are not borrowing to furnish your lifestyle. You can check my previous posts on financial literacy or investments – my views remain the same. I think adulting takes money at a whole new level; there are recurrent bills to be paid, there is family and social causes to be catered for, medical and other emergencies to be speculated, and the elephant in the room being black tax which can be a heavy burden depending on how well or badly you set limits. In short, expenditures seem to expand beyond measure as we grow older, or so I have experienced. Income may not be commensurate or increase exponentially, but you must manage and live within what you have – and try not to sleep in an empty stomach or rob anyone whenever you lack. It goes without saying that budgeting and expenditures tracking, even if at the very basics is important.

How often should we track personal expenditures?

I am no expert on money matters, but I think the clearer and more piecemeal one is with his/her budget and tracking of it, the better the chances of managing our hard-earned money well. You can follow this online community called the Wealthtribe. It was founded by a young lady who is passionate about young people coming together to talk about money and growing their wealth. In this particular link, she educates and shares tips on how to create personal budgets and tracking. If you are clueless on where to start, be sure to check it out.  In my case, I normally use a simple excel because it works for me, I have tailored it to suit my taste. I try to do a monthly track of expenditures as they unfold daily/weekly, and basically all other money streams (savings, investments etc) over the same period. I don’t always get it right, because there are months recording overshoots where I spend tonnes of hours wondering how this and that will be done considering the cash at hand is this and that. Frankly, I would probably jump at a chance to become my younger self when I did not have to worry too much about expenses, or where money will come from. Life was simple. But as we know, there is no going back in time.

I must warn that it is not easy to develop a positive culture, especially where responsive money management is concerned. But once you get the hang of it, you get relieved in knowing things for which you can or cannot splash yourself into based on your financial situation. It also helps avoid impulse purchases, not unless you are spending off a miscellaneous kitty – which I doubt is readily available in the current economy.

So how about a challenge to yourself to start own budget and expenditure tracking if you do not already have one? Technology has made it possible to find apps that can help us do that. But if you are old-school, go ahead and get a notebook (also readily available) and get on with it! Do what works best for you. Lastly, I think digital rather than cash transactions help to keep a history of expenditures which is a good reference if you ask me. I find it hard to trace what I spent cash on not unless I kept a receipt or something. Mobile money payments have helped solve that historical mess – so I would urge to make use of them and save yourself the stress or headache of figuring out where the money went. At the tap of your M-PESA history for example, you will tell what you paid for, and this can help with weekly rather than daily log of expenditures into your preferred tracking tool. The handling of personal cashflows doesn’t have to be some extra piece of work. So do take advantage of what would help to ease self-budgeting and expenditure tracking process.

Until the next post, have better times taking charge of your money!

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