If you want to lose a friend, lend them money, the old English idiom goes. It may seem rather harsh, especially in the African context where the spirit of Ubuntu often calls upon us to help our friends and family when they are in need - including lending them money.
Many friends and relatives will borrow money for a genuine reason and promptly pay it as promised. Some will even compensate you for the bank fees or the mobile money transactions you incurred - God bless them!
However, many other friends and relatives will become distant, rude, or disappear immediately after they confirm the soft loan has landed in their account.
Here are 5 kinds of people you should never lend money to.
We all have that friend or relative whose mobile money or banking application is ever hanging when there is a bill to be paid. An older version of this type of person was the one who always forgot their wallet at social events where some money was spent.
The pattern here starts small, with nearly insignificant amounts of money. You will be going for lunch as a group and your friend whispers that their mobile banking app is not working and you should pay the Ksh200 lunch bill- they will refund you.
Some other time you will be sharing a matatu ride and the friend will be like, “Tony you have a few coins with you I seem to have forgotten your wallet.”
You will often pay for these bills and I can bet this kind of friend never remembers to refund you your money. You have to ask for it and many times - if it's small sums of money - you let them go.
This behaviour is a red flag that you should never lend such a friend or relative money. If they cannot remember to load money on their mobile money accounts in advance, they will not remember to pay their dues.
Read Also: 5 Types of Friends We All Needed in 2022
It's not always obvious that a friend or relative is battling an addiction. However, you may have certain red flags that may lead you to suspect that your friend has an addiction.
For example, you will have that colleague who is borrowing money a day after salaries check in. Or that friend who is passionate about betting in all your social conversations. Then you have those friends or relatives who disappear for two weeks and show up like nothing happened.
A pattern of odd social behaviour, including inexplicable brokenness, conversations on behaviours and substances that involve addiction, and frequent visits to gambling sites - are red flags that should tell you to avoid lending such a friend or relative cash.
If such a person borrows your money, the biggest risk is that you are enabling their addiction - whether it's drugs, gambling, gaming, etc.
While they could pay back in some cases, there is a big risk that they will fail to repay your money sooner or later.
Instead, as a good friend, you should try and help that friend or relative quit the habit that is ruining their personal finances. The best route is to help them get professional help.
You may have a friend who has a pattern of borrowing money regularly as an emergency. You started small, say by lending them a Ksh1,000 bob and they repaid it - typically with Ksh200 on top.
You were initially worried they would not repay so you chose a small amount that you were comfortable losing. However, after the first experience, they ask you for Ksh2,000 and the figure keeps rising.
The pattern is always the same - borrowing on an emergency basis - and the return comes with a generous amount on top, and you cannot pinpoint exactly what your friend or relative does with these regular emergency funds.
If you ask, it probably is something complicated like selling likes on Facebook or something that does not make sense like viewing Whatsapp Status for a fee.
This could well be the kind of people who are debt-ridden - but operate by borrowing money to repay older debts.
The Englishmen define the phrase as robbing Peter to Pay Paul. A related concept has been widely used in Ponzi Schemes - for over a hundred years.
With advancements in technology and the growing financial space, most people prefer to borrow money from institutions, unless in special circumstances where they turn to friends or family.
It is not entirely abnormal for longtime friends or close relatives to borrow each other money and repay. However, if you see a newly found friend asking you to lend them money, it may well be advisable to run.
I once met a ‘friend’ in the workplace and in the evening, the colleague called to chat me up and before long, he was asking if I had money on my mobile money account because his token had “just run out as we were talking.”
To make it worse, the day-old friend wanted Ksh3,000 for tokens which I lied I could not access.
The rule of thumb is, if a genuine person needs some emergency funds - especially for small amounts of money - they have longtime friends and relatives they can borrow money from - without needing to ask their newly-made friends for money which makes them feel awkward.
Thus, if you get a request for a loan from a friend you have only known for a short time or that distant relative you hardly see - it may be a red flag and it would be advisable not to part with your money.
Read Also: Money and Me: How I lost Money to Friends
Kuna deal inaivana (loosely translates to “I have a deal that is about to give me a financial boom”) is a common phrase in the Kenyan lingo. It often involves a financial promise that never materialises.
A variation of this phrase has been used to make many Kenyans part with their money in the form of loans to friends and relatives - and the answer is always something close to the original phrase.
The arrangement particularly becomes fishy when the borrower promises to cut you in on the deal - on condition that you lend them money. The amount is usually quite significant compared to the lender’s investment.
For example, a friend may ask you to lend them Ksh100,000 to make a quick purchase of a piece of land with a ready buyer willing to pay Ksh1 million in a week. The promise is that from the Ksh1 million, they will not only refund your Ksh100,000 - but you will split the Ksh900,000 profit on a 50/50 basis.
This is one of the most obvious red flags on the type of people you should never lend your money to. It is often used to mask someone who has a debt problem - or even dishonesty. If a deal is so good, why can’t the borrower approach a bank, use mobile money, or approach a shylock - for the funds?
Borrowing or lending money through social channels, such as from friends and relatives is not a bad idea. It is particularly beneficial in situations where there is trust.
Read Also: Money and Me: Lend Money to Friends and Lose Both
The money could help you in an emergency where a formal loan would take longer to process, or would be too expensive compared to a soft loan from your close friend or relative.
However, lending money informally is an exercise that requires caution and due diligence to ensure you neither lose the money nor the friendship. We have highlighted some of the common red flags demonstrating the kinds of people you should avoid lending money.