The difficulty of living life on debt

I have spent a fair portion of my adult life in debt. I must have gotten my first bank loan when I was 24 years old. By then, I was a young, ambitious graduate trainee working in one of the accountancy firms in Kampala and I quickly found out that my salary - no matter how much I saved - was too meagre to meet my personal financial needs and entrepreneurial aspirations.

When I later ventured into start-up businesses, debt, especially from money lenders and friends, became all too common for me. And over the years, I have become distressingly familiar with that feeling of going to sleep each night, waking up each day, owing many people money far greater than what I can repay. The increasingly difficult economic conditions have made debt inevitable and it has become an everyday feature in many individuals’ lives. My experience, therefore, is not far-fetched. Talk to 10 adult Ugandans, and you will easily find out that nine of them are financing some form of debt ranging from family or friends, village saving groups, money lenders to bank loans.

How else can somebody who earns a monthly pay of Shs500,000 - Shs1,000,000 afford to pay his/her kids’ school fees in a decent school, take care of the ever-rising home expenses, pay rent, or even attempt to pursue a major project such as building a home or buying a car? We are often encouraged to save money in order to improve our financial well-being, but while this is desirable, I find it mostly unrealistic. For instance, how long will you take to save Shs20 million to buy a second-hand car or start a meaningful business? Without debt, it will probably take you forever! To be clear, debt is not always bad and many people have thrived through it. The problems, in my opinion, normally stem from the source/provider of the debt and the terms attached to it. 

Ideally, the best providers of debt would be the well-regulated financial institutions, especially commercial banks. But the trouble is, these institutions do not favor lower class people and informal businesses, which are the majority in Uganda. There’s lots of paperwork and stringent terms such as steady income and valuable collateral. Many people are left at the mercy of money lenders whose loans are obscenely expensive and hard to manage. They have less paperwork and a loan application can literally take you 1 to 5 days, but the consequences are usually dire. These money lenders can knock the wind out of you and their modus operandi can cause you migraine headaches.

Living on debt is not failure but it can cause failure, especially when you are weak and uninformed. This is why robust financial literacy training is urgently needed country-wide. Our people should learn how to assess their financial situations, evaluate their debt obligations, and formulate strategies to repay or reduce their debt in order to achieve financial freedom. In business, as in life, our best bet to survive in today’s tough world, will be the characteristic thoughtfulness and determination while dealing with debt. The financial decisions we make must be spot-on and should involve a review of a wide array of factors such as types of debt, providers of debt, interest rates, and repayment terms. Government must also play its part. I appreciate the recent initiatives such as the Parish Development Model and Emyooga. However, these initiatives have not been accompanied by sufficient financial literacy training, which could put their future success in jeopardy.

Debt is inevitable. But it must be approached with wisdom!

Mr Brian Mukalazi is the CEO, Talis Consults Ltd.  [email protected]