Money and Me: How I lost Money to Friends

I recently found myself in a world of trouble, after a friend sent me a text I deemed to be ‘disturbing’.

It all started innocently/annoyingly enough.

Have you ever opened those ‘Vipi Chief, I need a favor’ WhatsApp messages by accident?

That’s exactly what I did.

Watching the 2 ticks turn blue sent a chill down my spine. 

Anyway, Skimming through the lengthy composition, I picked up on 2 things – he needed two thousand shillings which he’d refund in 2 weeks time.

That was back in June.

Needless to say, the refunding part of the deal is yet to happen.

This has led to some very awkward chama meetings, as the friend in question is a very active member. My attempts to recoup my money are always met with “kuna cheque that is just about to clear’ then I’ll sort you out”.

I think it’d be fair to assume that we have all lent money to friends or borrowed from the same. However, assuming that we all get our money or pay back would be a stretch.

Take my case as an example, our decade-long friendship isn’t worth two thousand shillings, but the fact that I am yet to get a shilling back has definitely placed a huge strain on our relationship.

Lending to Friends: Good or Bad?

I honestly don’t have a definitive answer to this delicate question. 

Whoever said a friend in need is a friend indeed must have believed that lending to friends is part of the deal. However, I could make a strong argument that he/she made that particular statement after receiving a sizable loan from the said friend.

Don’t get me wrong, you should always be willing to step in for a friend at their hour of need if you are in a position to help.

However, my years of experience have led me to certain realisations that have made it much easier to let go of my ‘non-performing loans’.

It is important to always make clear and defined rules the moment you are lending or borrowing from a friend.

Is it a loan or a bail out? The former needs to be repaid within a stipulated period of time, while the latter is simply a donation.

If both parties agree on what the rules are from the onset, then your relationship is safe from awkward chama meetings and lengthy excuses.

I have also learned to use the ‘borrow from a friend’ route as my very last option. This has helped me avoid a lot of pain over the years.

The beauty of borrowing from financial institutions such as banks or digital money lenders (the credible ones) is that there are no emotions involved.

It is simply a transaction with things like interest and penalties attached to make sure I keep up my end of the deal.

On the other hand, I have found it near impossible to charge any sort of interest when it comes to friends. Bad loans are more often than not the end result.

There are still those friends who stay true to their word in terms of repaying on time, but they are definitely in the lower percentile.

Hard Data

A 2019 study by Bankrate.com on the effects of lending money to family and friends came up with some interesting findings.

46% of those surveyed reported a negative outcome had resulted from lending money to close friends and family.

37% said they lost money, while 21% claimed that the relationship with the borrower was fractured as a result of the debt.

If you are a little sceptical, then maybe we could turn to the world famous poet -William Shakespeare.

“Neither a borrower nor lender be, for loan oft loses both itself and friends,” Polonius tells his son in Shakespeare’s Hamlet.

The drama that comes with lending to friends and family has been in existence for centuries.

What’s The Way Forward

Well, I’m not one to lay out the rules having started out by confessing to have lost money to a close friend.

All I can share is my experience.

I believe in writing things down which is something I’ve carried over to the loan side of things. It was very weird at first getting a friend to sign on some piece of paper, but it has definitely reduced my non-performing loans.

Think of it as a formal commitment to repay, if they can’t bother to make such a simple commitment, buy yourself something nice with your hard-earned money.

If the borrower sends you the ‘I’ll refund ikiwa_________insert a bigger amount of money’ text, my very opinionated advice is that you run for the hills.

If you can avoid borrowing or lending to friends altogether, it would be an ideal world but then again, what are friends for?

This takes us back to my initial plan, making sure the rules surrounding the loan are defined from the get go...that was how I lost two thousands shillings to a good friend.

In this pandemic, that could have bought me at least 92 power units.

Anyway, as a personal rule, I always ask myself this simple question before sending money to a friend: ‘I’m I willing to lose this amount of money?’

It makes everything so much easier.