I've lost my business to loans and chamas and I’m heavily in debt. Please save me.

Avoid borrowing unless it's absolutely necessary and manageable. With patience, discipline and determination, it is possible to rebuild one's financial foundation.

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My name is Owen. I had been running a small electronics shop in Laikipia County until November last year. I had hoped that I could scale up but I ended up shutting down.

My business collapsed because of debts. I was paying rent at Sh12,000 per month for the shop. I had opened the shop using my savings of Sh250,000. I had started with simple electronics. I was doing well until I started joining merry-go-rounds in the same street where my business was situated.

I had three contributions of Sh2,000, Sh1,000 and Sh3,000 that were due every Saturday by 5pm. My calculations were that by the end of the three cycles, I would pocket a total of Sh150,000. However, I found myself dipping into my capital because weekly profits were not adequate to keep up with the contributions. As a result, my business slowed down and I was forced to take a loan of Sh120,000 from a microfinance to revive it.

Most of this money went into paying rent, making further chama contributions and only a fraction went to business stock. I took another loan of Sh40,000 and later on took another loan of Sh250,000. By the time I got my chama money, I had defaulted on the micro finance loan so badly that the chama money was not enough to clear the loan and the penalties incurred.

Business went haywire, and sometime last year, I realised that I was not making any money and was merely working to pay rent. I was working for the landlord. I sold the business at Sh50,000 and went back home. I am in default of close to Sh400,000. I am jobless and between me and poverty is just Sh50,000. I am on the verge of losing my family. I rely on my wife who is a P1 teacher and I don’t know how long she can continue to cushion me. A man is still a man, please help advise me on how to get back on my feet. What do I do with Sh50,000?

Expert advice from Dominic Karanja, Financial Planning and Investments Consultant

First, it takes courage to acknowledge financial struggles. The fact that you’re seeking help is an excellent first step. Business failure is common; the 2016 KNBS MSME Survey shows that 46 percent of small businesses in Kenya fail within their first year, often due to poor management, high costs, and inadequate planning. While external factors may have contributed to your challenges, accepting responsibility for past decisions is critical for moving forward.

Steps to rebuild your financial future

  1. Assess and organise your debt: Write down all your debts, including amounts, interest rates, repayment terms, and penalties. Contact your creditors (e.g., microfinance institutions) to negotiate repayment plans or restructure your loans. Consolidating the loans into a single, lower-interest facility may also help.
  2. Communicate with your family: Be open with your wife about your plans to rebuild. Gain her support by demonstrating concrete, actionable steps.
  3. Diversify your income: Explore part-time jobs like boda-boda riding, delivery services, or casual labor to create steady cash flow. Use your Sh50,000 savings to start a low-capital, high-demand business, such as reselling phone accessories, second-hand clothes (mitumba), or household items. Leverage your skills (e.g., electronics repairs) or invest in learning new skills that can generate income.
  4. Create a realistic budget: Track all your income and expenses using a notebook or app. Focus on essential spending and cut unnecessary costs.
  5. Avoid harmful financial practices: Steer clear of merry-go-rounds or high-interest loans unless you fully understand the risks. Remember that merry-go-rounds may have social value but don’t grow your money. They often lead to financial strain due to defaults and disputes.
  6. Invest in financial education: Learn about budgeting, saving, and investing. Start saving small amounts regularly, even during financial recovery. Seek affordable investment opportunities.
  7. Seek support and mentorship: Connect with a mentor or join entrepreneur support groups to gain guidance and accountability. Consider consulting a financial advisor for help in creating a personalized debt repayment and business strategy.

Important reminder: Avoid borrowing unless it’s absolutely necessary and manageable. With patience, discipline, and determination, you can rebuild your financial foundation.

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

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