BY DAVID ONJILI
Okoa is Swahili for rescue. In last year’s general elections, the Opposition coalition dubbed their manifesto Okoa Kenya, pointing to the fact that there is a general perception that Kenyans need to be rescued from something. But why?
Several companies market their products as though they are rescuing you. Worth noting is the fact at the end of the year, whatever activity they have engaged in must make for positive readings when the balance sheet and income statements are viewed. While such products may bring you convenience, in the long term, hidden fixed charges and penalties when cumulated show that the consumer gets the short end of the stick.
Debt is an integral part in both business and individual growth. There is both good and bad debt. When you take up a loan to finance a lavish lifestyle, you are walking down a perilous financial path. On the contrary, when you take loans to purchase assets, which later increase your streams of revenue, you are on the right path to financial freedom.
Generally, financial institutions or those seeking to exploit your hard earned money will always ‘sell you convenience’. What you fail to know is that seeking convenience is an indicator of poor planning or even living beyond your means. Yes, there are instances where an emergency can demand you seek such products but these are rare and wide apart.
Kenya Power and Lighting Company (KPLC) have introduced this ‘convenient’ credit facility on power tokens with partnership with Kenya’s largest mobile telephone network by coverage and financial muscle, Safaricom. Depending on your credit worthiness with M-Pesa, Kenyans both on pre-paid and post paid subscribers can use the short code *855# and follow the prompts to get instant KPLC tokens ranging between Sh100 to Sh1000, which is credited from their M-Pesa accounts at a service charge of 10% and payable in 7 days.
Each customer can register up to a maximum of 3 meters from which they can access the Okoa Stima facility.
Introduced in the year 2009 by the then Safaricom CEO Michael Joseph, the telecom service provider advances pre-paid customers airtime on credit and allows them to pay later. When it was introduced, a service fee of Sh5 was charged and the airtime repaid in 72 hours. The amount of credit advanced was determined by the previous month’s airtime usage. This airtime advance was repaid in 72 hours and failure to do so would deny you the service for 30 days.
Competition from other mobile phone operators made Safaricom change their terms. For example while the repayment period remained 72 hours, defaulters would be denied the airtime advance for 14 days only. The amount of airtime advanced would also be determined by the amount of airtime you have been using in the last 7 days. Interestingly, a service charge of 10% is levied in advance for any top up you receive.
While the above listed are services traded for convenience, Kenyans are accustomed to money traded for convenience. Sadly, when signing up one thinks that the charges are small and negligible while in truth, cumulating these amounts and observing them over a time frame of say a year illustrates a significant amount.
A salary advance is an indicator of a poorly budgeted and planned life that you are living. It is important to always live within your means. ç.
Salaried employees are the targets by financial institutions in this scheme. There exist hidden charges that seem negligible but remain significant in the long run. Varying from one financial institution to the other, salary advances have an almost similar requirement; the approval of your employer and your recent pay slip. Most institutions cap the salary advance to between 50% and 60% of your net salary repayable in one month and up to three months for the very lenient banks.
Some employers allow their staff to get salary advances during the mid month. In most instances, these advances are usually not more than 30% of an employee’s gross pay. Certainly, employees who seek such advances are the ones who seldom budget for their salaries; many who get these advances admit it is just cash they take to sustain their lifestyles. The real pinch comes at the end of the month when their salaries come and are less the advance and thus they are entangled in a cycle of debt.
It is apparent from the above illustrations that planning and budgeting is key to anyone with an income. While you cannot escape the fact that at times emergencies do occur, getting in the habit of preferring convenience over planning is expensive in the long run. Financial freedom is premised on small savvy decisions that accumulate into worthy goals in the long run.