Inflation, Interest Rates and the survival of Fintechs
As Inflation decreases, government rate of borrowing reducing and a new plan to finance; the golden question arises, "what will happen to the money market, will zero risk investors be able to reap a bounty harvest again, is Mutual Funds worth investing in, bla bla?"
The news of constant reduction in inflation rate and the determination of the Nigerian government to constably reduce its cost of borrowing has set the investment sphere in another round of tulip discussions on where else they should keep their money, key in this discussion is the FinTech industry which has had a rush into the savings and funds solution in the past couple months, most of which are promising their users huge interest rates in return for deposits and as customarily of the Nigerian mass investors, they want more money but don't want to forfeit a dime of their principal. These Fintechs are saddled with the task of leveraging every means to keep to their promise of high returns while making their funds almost liquid because of the premature level of trust within the market. If these Fintechs are here to disrupt the traditional finance, it makes it clear that technology is not only enough in the disrupt but deep business and finance strategy bundled with extreme risk diversification.
It bothers me if growth in these industry is currently hinged on the inefficiency and loopholes in the local economy, should the government protect this nascent industry by creating more debt, should these startups pivot their products to less costly alternatives? In all of these, I believe that they can win in the long run by educating the people using the several digital platforms and sending a wide message on what investment really is and then sit back and diversify their funds to favour the risk savvy and the other bulk of the populace who don't want to lose their dime no matter the circumstance.
It's time most of these startups grow bigger on their messaging and also create clear public perception about their business environment. It will be of no use at this point for any of them to still hide their business risk from the populace, someone needs to make the larger chunk of the don't lose my money investors aware of the risk of savings.
Several measures should be taken to solve the excess liquidity of assets, people should also know that dogs bite too.
Also, these startups need to use the decreasing rates as a moment of understanding the blessings of technology and moving beyond boundaries in their solutions to investment, there is a need to make people access foreign portfolios using technology. This will increase the industry's sophistication and help diversify their portfolios.
In all, there are lessons to learn, there's victory for the macro economy and there's short term repeal for investors.