In the Kenyan context, “robbing Peter to pay Paul” often describes individuals’ financial struggles where one debt or obligation is settled by taking on another, creating a cycle of financial strain without actually resolving the underlying issues. Many Kenyans, particularly in urban areas or among small-scale businesses, face financial challenges such as high interest rates, limited access to credit, and inadequate savings, which can lead to this kind of behavior.
Here are a few individual financial situations in Kenya where the phrase “robbing Peter to pay Paul” is often applied:
1. Microfinance Loan Cycles
Many Kenyans take loans from microfinance institutions (MFIs) to cover immediate expenses, like school fees, business capital, or medical bills. However, when it’s time to repay, some individuals find themselves unable to meet the repayment terms, especially when interest rates are high. To avoid defaulting, they take out another loan from a different MFI, only to use that new loan to pay off the previous one. This creates a cycle where the individual is constantly borrowing from one source to pay another, with no real financial progress.
Example:
- A woman running a small kiosk in Nairobi takes a loan from a microfinance institution (e.g., Faulu or Juhudi Kilimo) to buy stock for her business. When the loan repayment comes due, she doesn’t have enough savings from her business profits. She takes another loan from a different institution, like M-Shwari or KCB Mpesa, to pay off the first loan. However, the second loan also carries high interest, and she struggles to repay it, ultimately leading her to borrow again from another lender. This cycle of borrowing to pay off debt keeps her trapped in a financial struggle.
2. Payday Loans and Mobile Lending
With the rise of mobile money platforms like M-Shwari, Fuliza, and Tala, many Kenyans use payday loans or mobile lending to cover short-term cash shortages. However, these loans often come with very high-interest rates and short repayment periods. When individuals are unable to repay, they may use new loans to clear the old ones, perpetuating a cycle of debt.
Example:
- A young man in Nairobi might use Fuliza (a mobile overdraft service) to cover his expenses for the month. However, the service charges high fees, and when the payment is due, he doesn’t have enough money. To avoid penalties, he uses another mobile loan service like Tala to pay off the Fuliza balance. In turn, Tala’s loan comes with even higher interest, making it harder for him to repay, leading him to borrow again. This borrowing pattern creates a never-ending cycle of borrowing from one source to pay another.
3. Personal Loans and Family Support
In Kenya, many individuals take loans to support family needs, such as paying school fees, funeral expenses, or medical bills. However, when the loan repayment comes due and the individual lacks the means to repay, they might ask for money from relatives or friends. To repay those family members, they might take another loan, often from a bank or mobile lender. This again leads to borrowing to pay earlier debts, without addressing the root cause of the financial strain.
Example:
- A father in Kisumu takes a bank loan to pay for his child’s school fees. However, when it’s time to repay the loan, he doesn’t have enough savings or income to meet the payment. To avoid defaulting, he borrows money from his brother, promising to pay him back soon. But when the brother asks for repayment, the father borrows from a microfinance institution to settle the family debt. While the family debt is cleared, he still has to pay the microfinance institution, leading to further financial stress.
4. Credit Card Debt
Although not as common as in Western countries, credit card usage is growing in Kenya, especially in urban areas. If someone relies on credit cards for day-to-day expenses, they may struggle to pay the monthly minimum payments due to high-interest rates and accumulated debt. To avoid penalties, they may take out a personal loan from a bank to settle the credit card bill, only to find themselves in debt again when the loan repayment becomes due.
Example:
- A professional working in Nairobi uses a credit card to manage monthly expenses, including rent and groceries. When the credit card bill comes due, the interest is too high to pay in full, so they take out a personal loan from a bank to clear the credit card debt. However, the personal loan also carries its own interest, and when the repayment for the loan comes due, they are forced to take another loan or borrow from friends or family to pay it off, thus continuing the cycle.
5. Sacco Loans and Contributions
In Kenya, many people belong to Saccos (Savings and Credit Cooperative Societies), which offer loans to members based on their savings and contributions. However, some individuals take out loans from their Sacco to fund personal expenses or business investments. When it’s time to repay the loan and they don’t have the money, they might borrow from a different Sacco or even take a mobile loan to clear the initial debt, leading to further financial strain.
Example:
- A teacher in Kisii is a member of a Sacco and takes out a loan to cover the cost of a wedding. When it’s time to repay the Sacco loan, they don’t have enough salary savings. To avoid defaulting, they take out a mobile loan from M-Shwari to pay off the Sacco loan. However, the mobile loan carries high fees, and they now find themselves struggling to pay both the Sacco loan and the mobile loan, leading them to take another loan to cover the first two.
Summary
In all these cases, the central theme is that individuals in Kenya are borrowing from one source to pay off another, which does not solve their underlying financial problems. Instead of addressing the root cause of their financial challenges—such as inadequate income, poor financial management, or unplanned expenses—they simply shift the debt around, creating a cycle of borrowing that can lead to greater financial instability. This “robbing Peter to pay Paul” behavior is common in a country where access to credit is often easy, but financial literacy and long-term financial planning are still developing.