It’s another installment of the Funded Lifestyle series where we break down the A to Zs of finance with an African perspective. If you missed the last Funded Lifestyle post, you missed a lot. We broke down the history of credit across Africa. Did you know they used to give goods on credit in the ancient Benin Kingdom? That’s the type of knowledge you can expect from the Funded Lifestyle series. Check out our last post here.
In this post, we’re tackling myths about loans. We rounded up 3 of the most popular myths that we regularly come across and we are going to debunk them one by one. Ready? Let’s begin.
MYTH 1: Only irresponsible people take loans
This myth comes from the idea that only people living beyond their means take loans. However, this is not always true, especially since responsible lenders often create measures to block such people from accessing their loans. Unplanned events can happen to anyone. These types of events often require assistance outside the standard source of income. In such cases, loans can end up being a lifesaver.
Apart from emergency needs, there are certain milestones in life that require substantial amounts of money to accomplish. For example, buying/building a house, funding higher education, or starting a business, are accomplishments that are tough to achieve with savings alone. Funding these milestones with the assistance of loans can hardly be viewed as irresponsible when we also view these milestones as signs of responsibility.
When loans are taken for valid reasons with the intention and ability to repay, they can be a sign of financial discipline and responsibility.
MYTH 2: Loans are the gateway to financial instability
This is an idea we come across often, that sometimes goes like this: “I don’t want to start taking loans because I know one person that took a loan from some people and his business crashed after that”. These comments tend to allude to some supernatural force that lenders use to keep their customers coming back for more loans. Other variations of this idea claim that the borrower will become addicted to the extra funds from loans and will be unsatisfied with their regular level of income.
This myth ignores the fact that lenders only make money when their customers repay, meaning that it would be bad business to attract customers who are addicted to living beyond their means, or to force customers to take loans unnecessarily. For a lender to use tactics, supernatural or not, to keep lending money to people who are financially unstable, or on the path to financial instability, will mean that the lender is losing money with no way of making profit. That is the definition of bad business.
MYTH 3: African culture forbids taking loans
If you read our earlier Funded Lifestyle post, you’ve probably debunked this myth already. Excellent job, you can skip to the end.
For everyone else, here we go. As we showed in the previous post, Credit – Everything you need to know lending and borrowing existed in Africa as far back as the pre-colonial era. In addition to the examples listed in the previous post, here are some more examples showing that lending has existed in Africa for centuries and is part of our culture.
In the early 1700s, an English merchant in what is now the Republic of Benin, wrote that the African traders granted him 10 days of credit when his ship was delayed by weather conditions (Guyer et al., 1999 p.27).
In the 1870s, a report said that the King of Dahomey (now Benin Republic) had the “supreme power in cases of debt” (Guyer et al., 1999 p. 32).
In the Quran, there are regulations placed on credit and its collection, including the requirement for a contract and the possibility for loan extension in cases where a debtor has difficulty making a repayment (Quran 2:282-283; Guyer et al., 1999 p.80).
The idea of building good credit habits even exists in Yoruba culture as seen in the saying, ẹni yá ẹgbàá ´tí kò san o bẹ́gi dínà egbèje, which implies that a person owing a large debt should first pay it back before seeking an additional loan, even if the new loan is relatively small (Guyer et al., 1999 p.169).
Another Yoruba saying that encourages responsible borrowing is ẹmí tí o jẹ gbèsè ni yíò san-án, meaning debts should be paid back in one’s lifetime and not left as a burden for children or other relatives to repay (Guyer et al., 1999 p.169).
From the above, it’s obvious that African culture does not forbid taking loans. In fact, from these few samples, we have multiple instances of timeless advice on responsible borrowing and lending.
To sum it all up, loans are a fantastic way to achieve essential milestones in life, they are best used when there is a steady source of income for repayment, and our culture as Africans, encourages us to be responsible borrowers and lenders.
Access Bank, an unapologetically African institution, prides itself on its responsible lending practices while making it fast and convenient for customers to access loans via the QuickBucks app or through the USSD code *901*11#. If you need financial assistance to start or grow a business, download the QuickBucks app to check your eligibility for the Instant Business Loan today. Business owners with Access Bank corporate accounts may be eligible for up to N5 million in loans with a stress-free repayment plan. Visit https://accessbankplc.com/Instant-Business-Loan to learn more.
Sources
Guyer, J. I., Stiansen, E., & Law, R. (1999). Finance and Credit in Pre-Colonial Dahomey. In Credit, currencies, and culture: African financial institutions in historical perspective (pp. 27,32). essay, Nordiska Afrikainstitutet.
Guyer, J. I., Stiansen, E., & Hunwick, J. (1999). Islamic Financial Institutions: Theoretical Structures and Aspects of Their Application in Sub-Saharan Africa. In Credit, currencies, and culture: African financial institutions in historical perspective (p. 80). essay, Nordiska Afrikainstitutet.
Guyer, J. I., Stiansen, E., & Adebayo, A. G. (1999). Kòse-é-mánì: Idealism and Contradiction in the Yorùbá View of Money. In Credit, currencies, and culture: African financial institutions in historical perspective (p. 169). essay, Nordiska Afrikainstitutet.
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