Borrowing/lending friends money

LET'S start by getting the syntax right, you borrow from and lend to. The concern here is on the informal means of borrowing/lending, not the official route of doing borrowing or lending.

That being out of the way now let's deal with the real issue at hand. This is a very awkward discussion as this has been happening all the time. Family bonds and friendships have broken down after failure to settle debts. It becomes difficult when you have friends that just don't want to pay back despite having borrowed from you during their desperate time of need.

On this one you could be on the receiving end or be the perpetrator. Often perpetrators are perennial and among a set of friends it's known that you lend to such at your own risk. Some say they can't lend to such friends to preserve the friendship and maximum tranquility. Some will say they only lend to friends money they are willing to let go.

At MoB Capital we believe we need to talk about these difficult topics so that we can understand and prescribe solutions to such tendencies. After this we believe friends will "keep it real" and continue to be on each other's Christmas gift lists.

It's a delicate balance between feeling guilty, trust issues, helping someone in need, friendship, you have what they haven't, doing the right thing against opportunity costs associated with such credit.

Most of the times this credit is without interest and is based on verbal agreements, the bulk of it anyway. It's always the gentleman's agreement (please excuse the sexism in the expression). And with huge amounts the question arises whether you pen it in black and white or let there be security but mostly ends up just reducing it to verbal arrangement and witnesses being partners/friends to the parties involved.

How do you feel when a friend can't lend to you by giving one or two lame excuses and you know it. And how do you tell your friend as far they are concerned to you they are a risk not worth lending to. Cash talk kills no friendship it would be better to advise your friends accordingly so that position is known to avoid awkward moments rather than talking behind each other's backs.

You have some friends who honour their obligations and such friends are good friends indeed so keep them and cultivate a sense of belonging in preparation for bigger and better things. Like they say, you may never know when you might need them.

Please do not lend to friends if:
1. They never pay back
2. You are not willing to lose that amount
3. You value your friendship
4. It's not your money
5. You are going to borrow from someone to lend to a friend
6. They can't commit in writing on huge amounts
7. You know you can't ask that friend when are they going to settle their dues.
8. You know they will be misspending the advanced funds.

Please do not borrow from friends if:
1. You are not willing to pay back
2. You don't value your friendship
3. You are serial defaulter
4. You are borrowing from friends to lend to someone
5. Without explaining fully your financial circumstances at the time
6. You still owe them money
7. You are not prepared to be asked when you will be paying back
8. You don't have a specific use for the money. Borrowing for the sake of it is a disease that one needs to be cured of.

It's very awkward when you see someone who owes you going on spending spree like buying new wheels, eating better than you, indulging in more financial decadence than you. Imagine their children at school but not yours and yet they owe you.

Such inconsiderate vices cause trauma to those cash rich lenders in them trying to understand their friend's behaviour.

We hope this gives an insight into keeping friendship circles bigger and maintain cordial relations as these money issues are always a thorn in our flesh.

During these times of financial insecurities and inadequacies you need quite reliable friends that will be of help once in a while and keeping these relations is of paramount importance.

Of note such transactions between friends have advantages in that most times there is zero to minimal interest charged. The tenor is at the borrower's discretion thus reduces pressure on the borrower.

These are normally instant loans with no paper work, guarantors or having to undergo embarrassing and tedious interrogations. In addition no tedious paperwork and over charging on the overdue amount like what we as MFIs do.

To us it's a convenient, an efficient and effective credit system based on precedence.

We at MoB Capital and TEAM MONEY have declared this a MONEY FRIENDSHIP week so happy friendship week and enjoy the bonds you have with your friends in building long lasting financial freedom bonds.

If you live in Bulawayo please conserve water. If you live in Zimbabwe please use electricity sparingly: SOS (switch off switches) If you live on planet earth please preserve the environment

Morris Mpala is managing director MoB Capital (Pvt) Limited, a microfinance institution offering loans, micro-insurance and advisory services to small to medium enterprises as well as individuals.