We’re a couple earning 138k. How do we raise Sh10m to fund our mjengo and repay debts?

Hello, my name is Janet. We earn about Sh138,000 per month with my spouse. We live in our own house. We do some farming that reduces our food expenditure. Our side hustle takes care of grocery and transport needs to work – sometimes the hustle struggles to sustain these needs but we get by.  We have school fees of about 148,000 per year, an electricity bill of about Sh3,000 per month, water bill of about Sh18,000 per month (we partly sell this to our neighbours and finance our transport), and parental/siblings responsibility of about Sh15,000 per month.  We have a loan of Sh420,000 we need to pay and have a construction that needs about Sh1.8m to finish. Once this is done, we may increase our income by Sh40,000 per month. We hope to finish this by the end of April next year.  We have a plot that needs about Sh8 million to build and we cannot get bank financing because we are on CRB due to student loans. This will therefore have to be financed strictly from our savings. We hope to get out of our financial hole and be financially stable by 2028 April. Is this achievable? How?

Inziani Khasiani, the executive director at Klientele Kenya

Your financial requirements appear to be in three stages. The first is to repay Sh420,000. The second is to raise Sh1,8m to finish your house. The third is to raise Sh8 million to build your plot. Starting with the loan of Sh420,000, negotiate and keep a repayment programme. To address this, it is recommended to offer a token repayment of Sh5,000 and promise to clear the balance at the end of 12 months. I recommend that you join a Sacco that has a provision to lend “4 times deposits” and start saving with them. 

If the savings/deposits start in March 2023, at the end of March 2024, you will have made savings/deposits of Sh585,000 that can be used to secure a loan of Sh2,340,000. There has been a monthly reduction of Sh5,000 on the existing loan and the balance will be Sh360,000 in March 2024. You require Sh1.8 million for your house construction. 

You will be left with a balance of Sh180,000 that I recommend should be invested in the “farming” and “hustle” to build the foundation and improve the cash flows. As of April 2023, the loan repayment kicks in. Over a 45 months period ending March 2028, the monthly repayments will be Sh75,400. The revised inflows have an additional Sh40,000 pushing the revenue to Sh178,000. The outflows including loan repayments total Sh160,000. The available funds to be committed towards savings is only Sh17,000. Make cost rationalisation from water and parents and commit Sh25,000 towards savings/deposits.

The new loan should be fully repaid as of March 2028. The savings/deposits levels will meanwhile have reached Sh1,785,000.  The new savings/deposits can be used to secure a loan of Sh7,140,000 using the four times rule. I recommended that you scale down project construction 2 in line with the proposed funding available. You need to interrogate the level of borrowing that occasioned the CRB listing and have arrangements to get delisted for the above recommendations to work. I also recommend that you build on the hustle and farming activities and monetise them. For instance, additional income from these activities can come in handy in settling student loan obligations and top-up your savings.

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