Why the scriptures can be your guide to investment

Reading the Bible. FILE 

By Isaiah Opiyo

In Summary

• The parable of talents shows how one can manage money to generate returns.

I had not intended to turn today’s column into a Sunday sermon or a theology lesson but a recent encounter prompted me to share some of my experiences in this column.

Recently, I was invited by a church organisation to train their group members on personal finance management, particularly on the aspects of investments.

As I started the training, I observed that it was becoming challenging to introduce them to real stuff about investment without giving a biblical example. This was necessary to dispel the notion that everything about money, including investment, is sinful.

I cited the book of Matthew 25:14-28 on the parable of a master and his three servants to provide the right biblical foundation for the relevance of my session with them.

This parable is about man going on a journey who called his servants and entrusted his property to them. To one he gave five talents ( large units of money) to another two talents and to another one talent, each according to his ability before he left.

The man who had received the five talents put his money to work and gained five more. So did the one with the two talents who gained two more. But the man who had received the one talent went off and dug a hole in the ground where he hid his master’s money.

After a long absence the master returned and asked to settle his accounts with them. The man who had received the five talents brought the other five. His master was full of praise:

‘Well done, good and faithful servant. The man with the two talents also produced two more, also earning him the master’s approval.

Then the man who had received the one talent came forward: “Master,” he said, ......I was afraid and went out and hid your talent in the ground. See, here is what belongs to you.”

“His master was not pleased. ‘You wicked, lazy servant! You should have put my money in the bank to earn interest”

It is evident that there were three types of investors with different financial abilities and risk appetite. Before entrusting his finances to the three servants, the master had monitored their abilities and rated them accordingly.

This in today’s contemporary investment arena refers to one’s ability to manage money to generate significant returns. In the lending market, this refers to capacity which is one of the 5Cs of credit after character, condition, capital and collateral.

This explains why a bank would receive a loan application for Sh.450,000 and after thorough underwriting approve only a request for Sh300,000. This would imply that after the assessment of capacity amongst other factors, the customer’s business can only accommodate a loan of Sh.300,000.

In most cases, any lending beyond the customer’s ability can lead to overtrading as the entire loan amount would not be fully and efficiently absorbed to generate significant amount of returns that can cover the loan repayment amount as well as ensure continued profitability.

This is an important factor in investment, especially for budding entrepreneurs who are looking for loans and other forms of finances for their start ups. Budding entrepreneurs are urged to work on building the capacities of their businesses or start ups to attract investors.