If you are like most other people in the world, you probably like things money can buy. You want to make a lot, and very quickly. Maybe you are one of those who sends DMs to financial institutions looking for products with a 25% return in one month – we’re not judging you but, really? The truth is that money-making opportunities are becoming increasingly available, more easily accessible and less conventional in today’s world; you need to know where to look.
Moving from the known to the unknown
For instance, you have probably heard of fixed deposits you can facilitate with your bank where you get a discretionary interest rate based on your ‘capacity’. Uninspiring right? We think so too. Mutual funds, Treasury Bills, Government and Corporate Bonds, and Stocks are also quite popular, offering returns many times in double digits but are often shrouded in technicalities, conditions, and quite a bit of risk. However, have you heard of real estate investing, private equity investing, or peer-to-peer lending?
These newer and more productive investments are alternative investments. They are designed in such a way that you can earn a decent profit on investments that are typically less regulated than the more conventional stocks and bonds. However, these are not to be mistaken for get-rich-quick or Ponzi schemes because alternative investments are backed by real, verifiable assets and are provided by licensed investment managers.
So, where do you begin? We’ll focus on three alternative investment opportunities that will give you a considerable level of control in the amount and the way you invest: owning your own business, equity crowdfunding, and peer-to-peer lending. Let us paint you a scenario.
Adebola works as a Human Resources Officer in a consulting firm in Lagos. Like many of us, one of her goals in 2019 is to find ways to earn more money. She sets aside N20,000 as savings in her bank account every month, but for every month she has successfully saved, she has dipped into the funds the very next. She currently invests another N10,000 monthly in a popular money market fund, but when she considers what her returns will be by the end of the year, she is not impressed. Adebola has some other reliable options.
She can invest in her very own part-time side business perhaps buying and selling online, providing HR consulting or training services, or maybe even recording voice-overs for radio and TV adverts. Any of these businesses will cost her some money and a great deal of time but will likely deliver the highest return on investment out there. Case in point – the richest men and women in the world are all business owners.
If she does not want to shoulder the risk of failure or the responsibilities of an entrepreneur but wants to enjoy the benefits, she can invest in other people’s businesses; that’s equity crowdfunding. Here, she becomes a part owner of the prospective company and reaps the attendant rewards once the profits start rolling in – of course after thorough due diligence and fervent prayers. The downside here is that failure for the business almost always means failure for her.
Again, if she wants to bear even less of the risk associated with being a part owner of a business, she can adopt a quick in and out approach in what is called peer-to-peer lending (P2P lending). Here, she plays the role of a bank to individuals who need short-term loans to take care of projects. She reviews a borrower’s profile, the duration and the interest rate, and she determines if she is willing to lend; at the end of the period, she gets her money back plus x.
Certainly, P2P lending comes with its risks, especially when you consider the poor credit structure in Nigeria. Yet, it beats lending out money to family or friends who may or may not raise your blood pressure when it’s time to pay back, if at all they do. Although it is in its infancy stages in Nigeria, it enjoys increasing attention and is now properly organized and managed through formal institutions reducing the risk significantly.
Get in on the action
Now that you know, what do you do? Suppose Adebola has decided to start a part-time business buying and selling shoes online. While she may have a free platform on Instagram or Twitter, she must incur costs on purchasing the items to be sold; packaging; delivery or logistics; and marketing at the very least. Her N20,000 may not do much for her in this regard; enter P2P lending.
An excellent way for her to raise the money she needs is to get on a platform like FINT and apply for a loan. All Adebola needs to do is:
- Take a risk assessment test to determine what she is eligible for
- Choose the term of the credit she is applying for
- Upload the necessary documents and get verified
- Her request is live.
Lenders can then go ahead to review her profile and lend to her. She has the money she needs to start and can factor in her interest rate when pricing her goods, so she makes a good profit: no hassle, no collateral, no endlessly frustrating visits to the bank.
On the flip side, she can equally go on FINT, and lend her N20,000 to someone else who wants to start some other business at the given interest rate and go back to focusing on her HR duties knowing that the loan is insured, and she is guaranteed her money back. Furthermore, she can lend N20,000 to different people every month and earn interest rates on up to 39% across various investments.
If you’re looking for the catch, the biggest you are likely to see here is the illiquidity of such investments. Whereas Adebola can sell down on a stock or terminate a mutual fund investment whenever she pleases to get her money back, she must fulfill the full term of the loan she has advanced to do same. This is, however, softened by the fact that she does not have to worry about fluctuating market conditions that can affect her interest rate or a complete loss of her principal investment that conventional investment options are plagued by.
Fortunately, there is increasingly more information out there on leveraging alternative investments. FINT has identified a market demand and has set the stage to slowly but surely meet the financial needs of Nigeria’s teeming population. All you need to do is be willing to embrace the new.