My name is Reggie. I have a loan that I am currently servicing, with monthly deductions that have risen from Sh14,144 to Sh17,041 due to an increase in interest rates. I still owe Sh416,000, which I am scheduled to clear by May 2027.
Recently, I resigned from my job because I was dissatisfied with the lack of transparency in the hiring and promotion processes. Now, I have Sh300,000 in capital, which I’m considering investing in an M-Pesa business near my former workplace due to the high footfall and demand for the service. My goal is to generate a monthly income of at least Sh50,000 to support my family. How should I proceed?
Josephine Murage, Investment Banker and Financial Planning Consultant
It’s unfortunate that you had to leave your job under such circumstances. However, it’s crucial to have a strategy when exiting a toxic work environment. This strategy should include both financial and career planning to ensure continuity.
From a financial perspective, having an emergency fund is critical. Ideally, this fund should sustain you for a period while you transition to your next source of income. In your case, the Sh300,000 you intend to invest in an M-Pesa business appears to be your only buffer. From a career perspective, you should have clarity on your next steps—whether it’s transitioning to a better job, shifting into entrepreneurship, or furthering your skills to increase your employability.
Assessing the viability of your M-Pesa business
You’ve set a goal of earning Sh50,000 per month, but generating this income from an M-Pesa business with Sh300,000 in capital may not be realistic, even in a high-footfall area. This amount will cover not only your operating capital but also setup costs, rent, permits, and other expenses. Additionally, the M-Pesa market is highly saturated, with many operators offering it as an auxiliary service alongside other businesses, such as pharmacies or electronics shops.
Instead of focusing solely on M-Pesa, consider a broader approach. You could provide general mobile financial services, including banking agency services for various institutions. This diversification could increase your income potential. However, with your current capital and existing loan obligations, this option might still be a stretch.
Returning to formal employment
I recommend reconsidering formal employment while you regroup financially. This doesn’t mean giving up on entrepreneurship but rather gaining stability before venturing into a business. While employed, you can test potential side hustles and determine their viability before fully committing to them.
Once stable, set up an emergency fund by channeling a portion of your income into a money market fund or similar interest-earning facility. This fund will act as a financial safety net for future transitions.
Managing your loan
Your rising loan repayments suggest that you may be dealing with a micro-lender rather than a regulated financial institution. Central Bank of Kenya rates have been falling, which should have lowered interest rates for loans from formal lenders. If this is the case, consider increasing your monthly repayments to reduce the principal balance and shorten the loan term. This strategy will save you money in the long run by reducing the overall interest paid.
In the future, restrict borrowing to asset financing or investments that retain or grow in value. Avoid loans for non-essential luxuries, as these can trap you in a cycle of debt without generating returns.
Budgeting and household adjustments
You’ve mentioned that you’re a family man. Does your spouse have an income? Open communication with your partner is essential to mutually adjust your household budget. If your previous take-home salary was around Sh50,000, you can apply the 50:30:20 budgeting rule: allocate 50 percent to needs, 30 percent to wants, and 20 percent to savings and investments. These ratios can be adjusted based on your current financial situation.
Improving employability
Use this period to enhance your qualifications and skills. The job market is competitive, and staying relevant requires continuous learning and professional development. Consider taking courses, obtaining certifications, or building skills that align with your career goals. Strengthening your employability will give you a better footing in future job opportunities and negotiations.
While entrepreneurship is a noble aspiration, it requires careful planning, sufficient capital, and market research. Returning to formal employment temporarily could provide the financial stability you need to lay a stronger foundation for future ventures. Monitor your spending, prioritise debt repayment, and plan your financial moves with a long-term perspective.
If you have any money problems, send an email to [email protected] with your contact details. Questions will be addressed in this column.
