• Year of economic uncertainty due to elections has been worsened by inflation
"How long has he been away?" Maria Wanjala asked.
"He left for his rural home a month ago," was the reply from the debtor's neighbour.
Maria works for a micro-credit agency at the Coast. Her debtor took a loan from the agency earlier this year but has since defaulted on repayments.
Maria visited the debtor's house several times without getting any information, until the lucky encounter with the neighbour, who informed her of the missing defaulter.
"How do I reach him?" Maria asked the neighbour.
Shrugging his shoulders, the neighbour suggested that Maria call the man. Maria smiled. She had called that number many times without success.
"When you see him, tell him to come to our office," Maria told the man's neighbour as she left, fully appreciating the futility of her request. Just another day in the life of a debt collector.
It is not unusual for people to try getting away with not paying back loans, but the current economic circumstances have created more debtors. Many of them say they want to repay the loans but are unable to do so because business is not performing as expected.
Charlene Bahati, also at the Coast, owns a restaurant and has noted a decline in customers over the past several months.
She attributes the downward trend to economic uncertainty because this was an election year.
"Putting money into business at this time is like throwing it into a black hole for it to disappear," Bahati says. She's had encounters with financial institutions, but she prefers negotiating repayment instead of going silent.
Apart from the economic effects of the now-concluded electioneering period, Kenyan consumers have been hard hit by rising commodity prices and the pressure for school fees arising from the government's compressed school programme. The very short intervals between school terms left parents and guardians without disposable income.
Businesses are faced with rising costs of salaries, electricity bills, taxes, fuel and imported goods. Meeting the costs of business amidst low sales is a tough balancing act that is driving lots of entrepreneurs into taking loans. When it gets to a point of borrowing money just to repay previous loans, the business owner is caught in a debt trap.
There are two ways to get out of debt: increase your sales (hence your income), and cut your expenses. Get the most from existing customers through up-selling, cross-selling and diversifying.
Up-selling means offering better quality, higher-priced goods to your customers. Cross-selling is introducing a different but complementary product to your clients. Banks offering insurance services to their customers is an example of cross-selling. Both these tactics can increase the revenue yield from existing customers.
Most people choose to reduce expenses because it's easier to do. Cost-cutting is the low-hanging fruit among debt management solutions. With reduced expenses, money can be freed up to repay loans. Cost-cutting may require letting go of one or more employees, but this should be carefully handled to avoid over-burdening the remaining employees.