In 2008, Erastus Ojaamong, a teacher at a primary school, was 54 years and a member of the Mwalimu Savings and Credit Cooperative Society.
He had just three years to retirement but was affected by the 2009 directive that the retirement age be extended from 55 to 60 years.
This gave Mr Ojaamong a renewed sense of urgency. He had contributed Sh280,000 in shares at his savings and credit society.
He applied for a Sh400,000 development loan (long term) against his shares.
Mr Ojaamong would have applied for over Sh700,000, but he had another loan that he was servicing.
“With my shares, I would have qualified for Sh750,000 but I had a refinancing loan which barred me from taking more than Sh400,000, according to the sacco regulations,” he says.
The loan marked the beginning of his woes. He became a shylock, lending small amounts of money to friends on gentleman’s terms at 10 per cent interest rate a month.
“I made my own rubberstamp and told people that I was an agent of the Uwezo Lending Group — a phantom company,” he recalls.
“My fellow teachers thought that I was an agent of the money lending firm but it was just a special purpose vehicle I formed to help me advance my plans.”
Mr Ojaamong says he lent up to Sh50,000 at Sh5,000 fixed monthly interest until the principal sum was repaid.
He did not see the need for security because he was well acquainted with his colleagues and even knew their homes and families.
“I had only a receipt book where I would acknowledge that you had paid interest on your loan. Otherwise, the loan itself would be signed on a foolscap that was rubberstamped.
“Whenever somebody defaulted on a loan, I would gather a few women and men from my rural home and present them as shareholders who wanted to reclaim their money.
“The flipside was that it always took time for the money to be paid back, yet each time I hired the ‘shareholders,’ they had to be rewarded financially.
“For instance, for a default of Sh50,000, I would end up getting 0nly Sh35,000 after paying the temporary shareholders-cum-foot soldiers,” he says.
Then came the last nail in the coffin. Mr Ojaamong loaned a school owner Sh130,000, all the money he had.
The man promised to pay Sh13,000 in interest every month until the principal sum was cleared.
Mr Ojaamong was also assured that there would be no question of default because the school was a going concern — a business whose operations and existence were seemingly guaranteed.
The other loans were not doing well as almost all his clients kept postponing their repayments.
Cat and mouse games with the clients became the order of the day.
The matter worsened when the school owner went bankrupt and it emerged that his creditors, who included banks, were threatening to sell the school to reclaim their money.
“I am now embroiled in a legal tussles to reclaim my money, which I don’t see coming back” says Mr Ojaamong.
His Sh400,000 loan was not invested well and he was servicing loans amounting to more than Sh600,000.
Out of a gross salary of around Sh27,000, his loan deductions were Sh14,000 and none of the loans was yielding returns. “It is as though I took the money and threw it away,” he laments.
The teacher says that the extra years of service were a waste because the salary he earned during that time only went to repay the loan he got from the sacco.
“The only thing I am looking forward to now are my retirement benefits to help me finish educating my children and build a small structure. Now I can’t take any more loans. I barely have two years to go in salaried employment,” he says.
According to Mr Davies Kairu, the founder of the Mbao Pension Plan, employees should plan carefully as they approach retirement age and avoid undertaking projects that they have no experience in because it is risky.