Tuesday February 11 2014

Using scripture to guide your financial investments

By Isaiah Opiyo

In the book of Matthew 25:14-28, it is evident that there were three types of investors with different financial abilities and risk appetite. Before entrusting his finances to the three servants, the master had monitored their abilities and rated them accordingly. This in today’s contemporary investment arena refers to one’s ability to manage money to generate significant returns.

In the lending market, this refers to capacity which is one of the 5Cs of credit after character, condition, capital and collateral. In most cases, any lending beyond the customer’s ability can lead to overtrading as the entire loan amount would not be fully and efficiently absorbed to generate significant amount of returns that can cover the loan repayment amount as well as ensure continued profitability.

Budding entreprenuers
This is an important factor in investment, especially for budding entrepreneurs who are looking for loans and other forms of finances for their start-ups. Budding entrepreneurs are urged to work on building the capacities of their businesses or start-ups to attract investors. Since capacity influences the rate of returns and the business viability, an investor would only be willing to put in a sizable amount, depending on the potential of the business to generate some considerable returns.

In reference to the scripture, perhaps it is this logic that guided the master when he made the decision to distribute his capital amongst his servants. The first servant had demonstrated the ability to manage five talents of money compared to the second and the third servant who had the ability to manage two talents and one talent of money respectively.

In addition to capacity, risk tolerance is an important factor that influences the rate of return on investment. Risk tolerance is simply how one feels about risking his money on an investment to generate returns.