Their motto is impossible is nothing. They are sure that even with the dark cloud of destitution blowing across oceans to every hamlet and hanging ominously over humanity, becoming millionaires is just one get-rich-quick scheme away. They are the reason pyramid schemes and dubious multi-level marketing plots have spread fast across the country - why con men have managed to make away with millions of shillings before their scams collapse.
They are the youth of Kenya, and for them, investment is all about the thrill. The idea of ‘get rich, or die trying’ is not too far removed from their reality. According to a White Paper on consumer financial education with respect to capital markets - which is the part of the financial system that raises cash through the sale of shares, bonds and other long-term instruments - when young people think investment, they think get rich quick.
Instant millionaires
Crowd1 is the newest investment craze sweeping across social media, and its model of success is, like many before it, quite simple - the more people you recruit, the more money you make. The pioneers profit off the newcomers and boost the scheme’s spread. It is not based on any solid product or service, and predictably, it promises to make the masses instant millionaires. The findings of the White Paper are intended to inform a national consumer financial education strategy, according to the Capital Markets Authority (CMA). Among the habits, the report uncovered is the youth’s inclination to gamble in an attempt to multiply their wealth quickly.
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“Youth in business are biased towards get-rich-quick schemes and purchases that provide immediate gratification, and as a result many are involved in betting and the lottery, and frequently use expensive digital savings and credit platforms,” the report notes. And this isn’t something exclusive to entrepreneurs - even those who are employed will use their incomes to support a lavish lifestyle. “For example, youth in formal employment prefer to purchase tangible assets, such as cars, home electronics, clothes with designer labels and home furnishings depicting their ideal image,” reads part of the paper published earlier this year. True to form, a majority of young people, despite having little money to lose, will accuse savers of entrepreneurial cowardice.
They are driven by the blazing spirit of YOLO (you only live once) and will jump headlong into schemes and platforms that promise to double, triple or quadruple their money. And even if this dream is not realised, they still plan on making the most of the cash and time they have, taking loans to buy or kit out colourful vehicles that will speed past other cars on the highway. On the other hand, those who are over 50, retirees, Kenyans in the diaspora, high-net-worth individuals and foreigners tend to have more conservative financial habits, with most of them investing in the capital market because they understand it.
“They are keener at emphasising prudence in decision-making. This can be seen in both their income sources and in their expenditure patterns, savings and investment choices, and in their choice of influencers,” the CMA report says. In contrast, people with windfall gains (such as professional sportsmen, musicians and winners of sports betting jackpots) tend to be spontaneous in their financial decision-making. Among adults, the report found that women are better savers than men, while men take more risks than women.
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Women in micro and small enterprises, noted the report, tend to save in table-banking groups and have a great influence on each other. However, women running medium-sized enterprises save and think independently. Further, the money that women save comes from salaries and remittances, while men rely heavily on business for their income. Close to seven out of 10 women who were interviewed were more likely to seek financial advice from family, compared to six in 10 men. Fifty-three per cent of the women were also more likely to seek advice from friends and social networks, such as chamas, compared to 46 per cent of men.
Lucrative targets
Again, women were more likely to seek professional advice at 35 per cent, compared to 28 per cent of men. But the report found both male and female professionals are a lucrative target for professional financial advisors. “This means financial habits among Kenyans differ by gender, and that gender should inform assumptions while crafting investor education strategies for the retail sector.”
When it came to owning shares, which is part of the retail sector, among adults, employees and owners of medium and large-sized enterprises were more likely to be shareholders and own other securities. Men had slightly higher participation in the stock market than women, as did urban residents over rural ones. “The counter for equities at the Nairobi Securities Exchange (NSE) accounted for the most purchases and trading, and this observation was established to be the case in other jurisdictions globally.”
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Kenyan women, noted the report, are active in savings, credit and investment groups, “and have slightly higher savings rates and greater record-keeping practices than men.” Urban dwellers save their surplus money, while those in rural areas prefer to put such money in productive assets like livestock, which act as insurance against unforeseen vulnerabilities. And while Kenyans generally tend to save and invest using the group savings approach, there are those who have incurred losses in the recent past after falling victim to unscrupulous institutions.
Market participation, noted the report, was generally low because only a fifth of adult Kenyans held one or more securities, with urban residents and older males being the main investors. The youth had the lowest participation rate. It also emerged that high-net-worth individuals hold substantial investment across equity and debt products in the capital markets. They make investment decisions independently, meaning they have a relatively lower need for investor education. Retirees had high awareness on available investment platforms, and held significant savings and investments in the capital market, commodities and real estate.
