Kenya

I’m a boda boda rider; should I save or get a shylock loan to buy my own motorcycle in one year?

My name is James. I am 27. I live in Kawangware. I am a Bodaboda rider. I have leased a Bodaboda and our agreement is that I pay him Sh300 every day. This amounts to Sh9,000 per month. The rest of the money I make is mine. I fuel the boda and do the necessary repairs. There are days I make Sh500 net (after fueling and paying the owner Sh300. There are other days I make up to Sh1,000. And others where I barely manage to pay the owner Sh300. Because of the nature of my payments, I am not able to tell how much I earn monthly after all deductions. But I would say I make Sh15,000 before paying food and rent. My main expenditure is on rent and food since I am single and don’t have a child. I pay Sh300 for both lunch and supper. I then pay Sh6,000 for a single room. I don’t have a bank account. I save whatever I am paid on my mobile phone. I would like to acquire my own boda before the end of this year. A good local secondhand bodaboda goes for about Sh70,000 to Sh90,000. How can I save for this? There are also shylocks who lend new bodas. They ask for a deposit of Sh15,000. Then demand daily payments of Sh150 until the loan is cleared. Failure to pay daily risks getting auctioned or getting slapped with heavy fines. Is this a good option? Also, how do I make a budget and start living a more decent and well-planned life? In the next three years, I would like to acquire a TukTuk or a small taxi cab in five years. Is this possible? How do I do it?

Benjamin Cheruiyot – the Engagement Lead at Abojani Investments, a personal finance and investments advisory firm

With your Sh15,000 monthly estimate in earnings, it is obvious that you are getting by on a shoestring budget. Your total expenses are Sh6,000 on rent and Sh9,000 lunch and supper which means that your savings aren’t well defined. Assuming an average savings of Sh200 daily, it accumulates to Sh6,000 monthly. Your savings plan is well charted – you intend to buy a motorcycle by year-end and a taxi cab in four years. But savings on mobile phones are prone to unplanned use since you have easy access. A good savings avenue is a SACCO.

This will help inculcate a habit that leads to a more optimistic outlook of your personal finances. If you are able to save Sh1,000 monthly in the SACCO’s FOSA account, you will be able to meet short-term emergencies. Sh5,000 can be deposited into the BOSA SACCO’s account to accumulate Sh25,000 by December. This will afford you a 3X loan multiplier totaling Sh75,000 that can help you acquire a secondhand but serviceable motorcycle. The daily Sh300 that would have gone to the motorcycle owner will help you service the loan to completion within a year. Going the shylock way is ill-advised due to the high interests and strict repayment conditions. Shylocks often prey on desperate, unsuspecting young people like yourself.

It is also important to consider making your own food as the Sh300 spent on daily meals is high. Breakfast at an estate hotel may be cheap but you can make lunch and supper at Sh150 or less. Doing this will save you at least Sh100 daily, an extra Sh3000 monthly. Increase FOSA savings to Sh3,000 and BOSA deposits to Sh6,000. The latter will accumulate to about Sh216,000 in three years. Besides earning annual interests, you will access a Sh600,000 loan (on the 3X multiplier on savings). This will get you a car in good condition that you can use as a taxi cab. With average net earnings of Sh1,000 per day from the taxi, you should be able to clear the SACCO loan in another four years at Sh15,000 monthly and use the balance to seek comfortable payments towards a plot outside town for your own house. 

Take advantage of your current single status when you have very minimal responsibilities.

Francis Ngugi Kiarie, Senior Business Development, Sales and Training Officer, Enwealth Financial Services

You can start by having a budget that will guide you. 

With numbers shared your projected expenditure equals your income. My suggestion would be first to mitigate your expenses based on your income. You might not be able to alter your food expenditure. However, you can play around with the rent. 

If we reduce your rent (for now) by Sh3,000, in five months based on your income you would be able to sort out the Sh15,000 deposit you need. You can then proceed with paying the 150 shillings per day since it may take longer to save up for the second-hand bike. You will then be able to save Sh4,500 from the 300 you pay daily to your motorbike employer and an additional Sh3,000 from the reduced rent expense. 

That will sum up your total monthly savings to 7,500 which you can apportion an amount and accelerate your loan repayments from the motorcycle lender or save up the entire amount in a Sacco. In a year you will have saved up Sh90,000. 

Let’s be a bit practical and say you manage to save only Sh70,000 a year. In five years, you will have saved Sh350,000. This won’t get you a car but it can be a deposit towards acquiring one. You will have cleared the loan since it takes nearly two years to fully purchase the motorbike on hire purchase. 

The goal of living a financially free life is always thinking about the future. Always plan ahead, think ahead and enjoy the process. Even as you save towards your car and most probably a house, remember that 40 years from now you won’t have the energy to work as hard as you can now, but you will still need money. Start saving towards your retirement as well, by setting aside some money towards your retirement through a regulated pension scheme. 

If you have any money problems, send us an email via [email protected] and leave your number for contact. Money questions will be answered on this page. 

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