I have the opportunity to reside at an area where I am greeted every morning with a fairly enviable view. Enviable in the sense that I get to see the populace go about their hurried activities as they try to justify the maxim “the early bird catches the worm”. In this delineation is juxtaposed various health addicts that have taken up this parvenu mode of exercise that is about as effective as Ruto explaining that the reason he has formed a new party is because he doesn’t like attention.
First of all, I have nothing but admiration for those who are willing to put their bodies through torture so that they can be á la mode or so that the society can give them that much needed nod of approval. We all want to belong somewhere; that’s why financial institutions are coming up with nigh ingenious ways to appeal to that part of the human brain that yearns for peer approbation. This is why there are such existences as ‘Executive accounts’, ‘Diva accounts’ and to some extremisms, ‘Business club’. This is the height of snobbery that is reminiscent of the French revolution. However, I digress.
Jogging is about as helpful as the plethora of diets that keep popping faster than Airtel keep lowering their calling rates. It’s akin to attempting to remedy malaria by incessantly swatting away at the mosquitoes. In fact, there was a time I saw a lady jogging while carrying a single dumb bell and my default reaction was, “Dumb belle?” And this is more or less the same reaction I have whenever I hear people talk of the myriad bank loans on offer.
As I write this, the lowest interest rate earned by a bank loan has to be 23%; which is a great improvement from the highs of 25% or even 30% witnessed towards the close of 2011. This means that for the least loan amount of 50,000; minus the hidden charges and the ilk, you’d have to pay double your loan amount in less than 7 years. This is all under the assumption that there is no clause that allows for rising of the lending rate by the bank. This is what eventually killed the US economy and to some great extent the world economy.
The fundamental issue about bank loans, just like jogging; is trying to curb an issue that is (pardon my French), running away from you. In jogging, the goal is to cut one’s podginess whilst taking every precaution not to look like a weight lifter at the Olympics. Whereas for bank loans, the banks try to take up as much risk as they possibly can without exposing themselves to such adverse risks as what happened to the Lehman Brothers Holding. In both cases it is a matter of wanting to have your cake and eat it too. For banks it becomes much worse when they start putting on too much weight; which is to say when there are more cases of default in payment.
This is comparable to putting on weight despite one’s incessant morning work outs and jogs. This is forgetting that no matter how much one jogs, so long as your body decides that it wants food, there is no way to stop it. Much the same case in default of payment. So long as someone defaults in payment, no matter what amount of property you take from them; chances are you won’t recover your full amount. This has not deterred modern-day Shylocks from over-reaping where they have sown little. This though doesn’t change the fact that bank loans are a double edged knife that eviscerates both the loaner and the loanee.
To quote an exceptional economist: a financial meltdown is like radiation, not easily recognisable until a neighbour starts losing some hair, a job, or even their house. When it gets to the point where banks are shying away from issuing loans as if meting them out gratis, it is time to consider extreme measures rather than the staid jogging.