How to make floated economic models work

If anybody wants to improve the economy but believes the solution lies in putting money in people’s pockets, the modules suggested so far will not work.

Adding Sh100 billion to the Constituency Development Fund (CDF) will add accountability queries. Identifying the youth to lend the money to will be a tall order and open to abuse.

Try supporting the established systems: saccos, banks and micro-finance institutions (MFIs) that have a strong presence deep in the villages. Banks and saccos are accessible to the middle class and have systems for lending and recovery that can ensure continuity of the funds, proper management and integrity.

Simply put, pool the billions—which Raila Odinga has proposed to give every individual at Sh6,000 monthly through a stipend programme—in the financial institutions. The unemployed can then borrow it on certain terms. Make interest as low as 0.5 per cent per month — or six per cent per annum.

The same should apply to the bottom-up concept that is being promoted by Deputy President William Ruto. Let him channel the Sh100 billion to the MFIs, saccos and banks, peg the interest at 0.5 per cent per month and we shall turn around the economy of this nation in a few months.

The concept of handouts won’t work. It won’t change our economic status. It won’t create any impact, but only more scandals.

We already have the solution to our economic woes: These financial institutions have wide networks and carry the magic card for economic redemption.  And that is all we need.

Jim Mugo Ngorano, Embu

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I recently read in the Daily Nation that a man has gone to court claiming ownership of the bottom-up economic model being promoted by Deputy President William Ruto. He claimed that the DP hijacked it from him.

Cognizant of the sub judice rule, I will, under the cover of fair comment, briefly comment on it.

When we talk of “bottom-up”, that is the internationally recognised term for microeconomics.

Microeconomics concerns itself with how individuals earn, how much they earn, how they spend and save, how many are unemployed and if some want to skip available vacancies and remain jobless for some time.

It also dwells on what companies produce, at what cost, to whom they sell and at what price. Everything is looked at up to the granular level as firms’ profitability and the consumers’ utility is studied.

The opposite of bottom-up is top-down—internationally called macroeconomics. It includes the monetary policies of central banks and fiscal policies of governments.

Microeconomics and macroeconomics are interrelated. However, governments are limited when it comes to controlling what happens at the mic-roeconomic level. But of course, good top-down policies are always welcome at the bottom-up level.

Top-down should not be seen as a bad thing. Needless to add, it has to do with the setting of monetary and fiscal policies.

Githuku Mungai, Nairobi