Monday, April 26, 2004
Bank Money is Not a Curse, You Just Need to Know How to Use It
By Joachim Buwembo
We live in tricky financial times. Many small firms are going under and businessmen are looking for jobs, locally and abroad, while people come up with creative explanations for what they are undergoing.
In Kampala today, there is a belief among local traders that money borrowed from banks is cursed, and brings bad luck to anyone who touches it.
Someone gets a hefty overdraft and orders a consignment of stock, say electronics, for his shop. He monitors his containers all the way from the port of shipment to Mombasa. Finally, it reaches Malaba... where a more powerful trader clears 10 containers of similar products swiftly and gets to Kampala�s small market first.
Because of his larger scale of operation or his ability to dodge taxes, he prices his stuff much lower than the break-even price of our one-container man. The little man�s stuff finally gets to town. By now he is already a nervous wreck. He tries all the tricks in the book. He gives some stock to hawkers to comb the market on foot. He tries to sell upcountry. Everything. But doom inevitably stares him in the face. The only option left is to flee the city, either for the village or abroad to do menial jobs. He offers his consignment at half price to another trader and makes a dash for safety.
His counterparts in the neighbouring shops start whispering, wondering about his whereabouts. As creditors start the hunt for our man, the neighbours sigh with resignation, murmuring the now common phrase, Bank money brings bad luck.
Then why are the poor fellows going for the bad luck money? Things were not always like this. Banks were generally inaccessible to your small trader. Some of the latter even kept no accounts. On the rare occasion that they were paid by cheque, they would look for someone with an account to have the money processed � at a fee.
Then competition hit the banking industry. An unprecedented wave of adverts soliciting customers followed.
Wherever you turn or tune in, a bank is telling you to open an account with them so they can lend you money on soft terms. There are promotions you would usually associate with soft drinks. Open an account here and you automatically enter a draw to win a car; Come to our bank for the lowest lending rates; An account with us enables you to withdraw your money anywhere in Uganda; With our debit card, you can withdraw money anywhere in the world.
Those are the commercial banks. But there is a mushrooming of microcredit institutions. These don�t emphasise security and allow all manner of guarantees, which include committing other people, willing ones, to guarantee the debt. These are the people who will grab your property if you fail to pay and sell it very quickly in order to save their own necks. The little tailoring business can�t proceed if the woman�s sewing machine has been confiscated by her friends and sold!
Everywhere you turn, someone is offering you credit. People not used to handling large sums of money are getting cash and in many cases, their businesses are not doing well. Bank money! comes the ready explanation when someone goes on the run and his property is seized.
The fact is, before easy money was made available to the people, sufficient education should have been undertaken. Proper use of institutional credit is not yet part of our culture. Little wonder then that cash schemes like gift circles and merry go rounds are so popular wherever they are introduced, sometimes with disastrous results.
Joachim Buwembo is the editor of Sunday Vision of Kampala
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