There are infinite ways in which individuals lose income. Whether employed or in business all it takes is a single misstep and you are left clambering in a financial rabbit hole. A recent report from the International Monetary Fund indicates that Kenya stands at a higher risk of defaulting on its debt obligation, in comparison to a similar period last year.
Kenyans themselves are not fairing any better. Recent data from the Transunion Credit Referencing Bureau states that 500,000 Kenyans have been listed as mobile loan defaulters. The rules of engagement define a defaulter as one who remains inactive in their loan repayment for a period of 90 days.
The difference between accruing and plundering wealth and resources is very much psychological as it is environmental. It boils down to the thought process, shaped by one’s personal values, experience and environment.
1. Confirmation bias
Confirmation bias is defined as the tendency look for and use information to confirm our preconceived idea or belief. The first stage of financial turmoil lies in decision-making; losing money is simply the ripple effect.
According to Nobel-Prize winner and psychologist Dr. Daniel Kahneman, most of the decisions we make in a lifetime are heavily influenced by our intuition which allows for biases. The outcome is a string of speedy and illogical decisions.
Mishy Wangari, an online fashion entrepreneur, learned the hard way the implication of illogical decision-making. It all started when an advertisement from a local real estate company on a popular local radio station, promised to offer healthy and ‘guaranteed’ return on investment for an agribusiness project. Falling prey to the allure of the succulent returns, her clouded judgement could not allow for proper risk analysis of the investment.
“The terms were very exciting and putting into consideration it was a well-known company, I had utter confidence in it. I parted with an initial Kshs. 320,000 which was required for purchasing a piece of land and a further Kshs. 290,000 for the setting up of a greenhouse. I was promised returns amounting to Kshs. 400,000 every year,” says Mishy. For an investment she made in 2016, Mishy is yet to receive even a dime.
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