I earn Sh28,000. Should I take Sh700,000 loan to buy Tuk Tuks, boost my wife’s M-Pesa shop?

I earn Sh28,000. Should I take Sh700,000 loan to buy Tuk Tuks, boost my wife’s M-Pesa shop? Photo | Photosearch


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I am however not sure this is a good idea. Can I even afford the loan? Would there be an alternative way of achieving this? Please advise.


My name is Jeremy. I am married and have one child. I am employed as a contract employee with a net salary of Sh28,000. Expenses are as follows; Rent 6,000, food 6,000, shopping for baby 2,500, airtime 2,000, transport 1,600, water & power bills 600. The remaining 9,300 has been clearing debts from family members and supporting parents. I have no debt. My wife has an M-Pesa shop that I want to boost. She makes Sh10,000 monthly. I intend to take a loan of Sh700,000 to buy two second-hand TukTuks to be making a total of Sh1,600 daily and boost my wife’s business with Sh200,000, then deposit Sh100,000 into my Sacco savings account and a savings account for my baby. I am however not sure this is a good idea. Can I even afford the loan? Would there be an alternative way of achieving this? Please advise.


Inziani Khasiani, the executive director at Klientele Kenya

Assuming your Sacco will approve the loan for 48 months, the monthly repayment comes to approximately Sh18,000. Using the above figures, the repayments appear high given you have Sh9,300. I would recommend a lower amount. On a loan amount of Sh400,000, the monthly loan repayment comes to approximately Sh10,500 for 48 months. A loan of Sh600,000 would require a monthly repayment of approximately Sh15,500. Assuming the proposed investments will boost your revenue, I would recommend going for a loan of Sh600,000. What are the avenues for investment for the loan proceeds? The M-Pesa shop has demonstrated a steady income of Sh10,000 per month. Investing Sh200,000 could get an income of over Sh30,000 per month. You propose to invest in two second-hand tuk tuks from which you estimate a daily [net] income of Sh1,600 or Sh48,000 per month. While the revenue estimates appear realistic, I recommend you exercise caution. One, second-hand tuk tuks need a lot of repair costs. Two, a high percentage of employee theft occurs in cash businesses.

If the estimate for two units is Sh1,600, one unit will bring a daily income of Sh800 or Sh24,000 without repairs. Within 10-12 months, you should have adequate funds to buy a second new unit. Instead of buying two second-hand units, you should consider buying one new unit. To reduce on pilferage, you should institute cash monitoring measures through available mobile-based platforms. 

A new unit will cost between Sh300,000 to Sh400,000. The opening and maintaining of a savings account for the baby should be a monthly affair. Instead of a Sacco savings account, you should consider opening an account with a Money Market Fund which will yield much higher growth. If there is a balance on loan proceeds after investing in M-Pesa and Tuk Tuk, this can act as an opening balance. Commit a monthly saving to this channel. The additional income from TukTuk investment should be focused towards expanding the fleet. Similarly, M-Pesa profitability should partly be ploughed back.


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I earn Sh27,000 and want to invest in MMFs but I don’t know what they are

My name is Anne. I earn Sh27,000 after statutory deductions. My expenses are as follows: Food Sh6,000, Rent Sh4,000, Transport Sh2,300, electricity bill Sh350, Savings Sh1,000 in Sacco, Emergency Sh6,000. I save the rest of the money in a savings bank account. I'm a single parent of two boys. The firstborn graduated from the university last year. Though he's yet to find a job he's proactive. The lastborn is awaiting KCSE results. I would like to know how I can invest my money instead of just having it in the bank. I have heard about money market funds; what exactly are they and how can I go about investing in them? Which other activities can I invest in for passive income? My son will join college this September so I need another income stream. My job is 8-5 and weekends are spent doing house chores and resting.


Rhina Namsia, the founder of The Acemt Consulting, a training and consultation company that provides financial planning and investment advisory.

A money market fund is a type of unit trust. Unit trusts are a collection of funds from different individuals, institutions, and even organisations. These funds are then invested in low or medium-risk ventures to generate a return that is then shared with the account holders in the trust fund. 

A money market fund invests in low-risk risk ventures, which are more liquid, meaning you can access your money easily, and earn interest on a compound basis. Unlike a bank account, a money market will earn interest on top of the available interest plus principal in the account either daily, monthly, or annually depending on the fund manager.

Your net income is Sh27,000 and your expenses are Sh12,650 which accounts for 47 percent of your net income. This leaves you with 53 percent to save and invest. You already save Sh1,000 in a Sacco and Sh6,000 for emergencies. Where’s this emergency money saved? It should be kept in an account that can easily be accessible whenever needed. A perfect account for this will be a money market account. 

The advantage of this account is that it will still grow your money as well. Before investing the first thing you should do is to determine what your current financial status is so that you evaluate how much you have that can go towards investments. In your case, you have 27 percent of your income (7,350) that can be directed toward investments. The next thing is to determine your future goals both long and short-term. These goals are what will inform which investment vehicle to pick because each vehicle carries its own level of risk, and return and even informs how long one can wait to start receiving returns.

Given the nature of your job, which seems full-time, you must sacrifice some weekends to carry out a side hustle. That can earn you extra income. You can think of an activity that you are good at and monetise it. 

You need to understand that passive income grows from an active income. Good examples of these assets are Sacco shares that earn you dividends, stocks to give you dividends as well and capital gains when sold at a profit, and bonds. 

Your capital is however not huge enough to invest on a big scale in these assets. This doesn’t mean you cannot start with what you have. Your son joining college means you have about seven months to prepare. You can increase your Sacco savings to Sh3,000 to increase the amount of loan you can be offered and will come in handy if you fall short on funding your son’s education. 

Reliance on loans to fund your son’s university education must not be the goal though. This funding should ideally come from your additional income streams such as weekend side hustles. The loan can also act as an emergency entry measure before other funding measures such as HELB are accessed. 

If you do this, you remain with Sh4,350 for investment. Save this money in another money market account with an aim of either saving for a business or as you wait to figure out what business to start. To open a money market, you can walk into any fund manager or insurance company which offers this product or just call them. All you need are copies of your ID, KRA pin, a passport photo, and an ATM card copy. Other companies can as well open your account right from their websites or online. Check companies such as ICEA Lion, CIC insurance, Old Mutual, Sanlam, and others and evaluate their rates. Make sure you do thorough due diligence to avoid putting your money in a rogue fund manager.

If you have any money problems, send us an email at [email protected] and leave your number for contact. Money questions will be answered in this column.


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