Imagine at the age of 16, on your birthday you were allowed to immediately walk into any car dealership and drive off with an “appropriate” vehicle. Since you are young and society is not quite sure about you, maybe you are allowed to drive a 1.1 litre to 1.5 litre vehicle. Imagine that was the case whether or not you had a license, you have seen your parents driving, you have seen other drivers on the road, you have seen accidents and you have been told to avoid accidents and other bad drivers. So you get out there and do the best you can, your driving life has begun!
This situation is unimaginable, however, this is an accurate analogy of what is happening when it comes to our financial lives. At the age of 18, millions of people around the world qualify to take up banking services but do not have the ability or understanding of what they are taking on. Often in communities and families, you have your first bank account not having had a discussion of what a cheque, savings or credit account are, how to use them and make the best of each of these. The first people to talk to us about our finances are often those who are trying to sell us a financial product, and we trust that they know what is best for us!
Often times the first time we have an honest discussion on how to best manage our finances is when you are deep in trouble, or rich enough to have a financial advisor. The predominant banking model of the past didn’t address this because in many ways, financial institutions profited from having customers make mistakes, the number of late fees paid, additional interest on credit accounts. But in truth these customers would not be long term profitable clients, often the negative experience would mean at the first opportunity they will switch.
The work we are doing here at the Africa Financial Inclusion Network is to challenge this existing paradigm. We believe that by having these conversations early, in a non-pressured, non-sales environment we are building the customer of the future. An engaged and positive customer who makes fewer missteps and becomes the more profitable wealth management client sooner rather than later. The partners we work with are similarly forward thinking, spending time and resources to build the financially capable clients for the future.
Written by Zviko Mudimu – Executive Director at the AFI Network
Challenging Stereotypes is a new series of articles written to challenge our thinking around personal finances in the African context. The articles are written as part of a new initiative called Africa Financial Inclusion Network which is looking to expand the conversation around financial inclusion on the continent. We welcome contributions from those who are interested in sharing their perspectives.
Please send your articles to firstname.lastname@example.org.