FINANCIAL STEWARDSHIP GOD AND YOUR MONEY PRESENTED BY KIBBY KARIITHI 9 TH FLOOR, FINANCE HOUSE, LOITA STREET P.O. BOX

1. FINANCIAL STEWARDSHIP GOD AND YOUR MONEY PRESENTED BY KIBBY KARIITHI 9TH FLOOR, FINANCE HOUSE, LOITA STREET P.O. BOX 41684, NAIROBI TEL: 020 2210178 FAX : 020 210500 EMAIL : info@afrikainvestmentbank.com

2. What does the Bible say? • There are twice as many verses in the Bible about money than there are about faith and prayer combined. • Solomon was the wealthiest man who ever lived. In the book of proverbs, he mentions wealth and poverty as one of his major themes because of ‘the need to give prudence to the naïve.’ - Proverbs 1:4

3. We are lovers of money • There will be terrible times in the last days. People will be lovers of themselves, lovers of money. - 2 Timothy 3:1

4. But we know that we must • …Seek first his kingdom and his righteousness and all these things will be given to you as well - Mathew 6:33

5. In the beginning, God (Coram deo) • God created the universe both animate and inanimate, spiritual, physical, separate from himself but independent from him. • God is both transcendent (outside his creation) and immanent (present within it) • He is everywhere present and involved in history. • As creator, God is the true owner of all that we see. Man is but a steward. • The earth is the Lords and everything in it, the world and all who live in it. - Psalms 24:1

6. What have we done? • They exchanged the truth for a lie and served created things rather than the creator. - Romans 1:25

7. Gods rescue plan • For God was pleased to have all his fullness dwell in him to reconcile to himself to all things, whether things on earth or things in heaven, by making peace through his blood shed on the cross. - Colossians 1:15-20

8. Who is Jesus? • C V in Isaiah 52:13 – 53:12 What does he ask of us? • In the same way, any of you who does not give up everything he has cannot be my disciple - Luke 14:33 • Turning to Christ has often led to losses of jobs, or families or sometimes even to the loss of the believers life. • In order to fully understand Gods purposes for our finances, we must turn to the cross

9. We belong to the Lord..But this is what the Lord says – He who created you • O Jacob, he who formed you, O Israel, Fear not for I have redeemed you. I have summoned you by name: You are mine. Isaiah 43:1 • God has a purpose for our lives for we are God’s workmanship, created in Christ Jesus to do good works, which God prepared in advance for us to do.

10. Purposes • Glorify God in all that we do - Ephesians 1:12 • Obey God in response to his will and calling • To love God and others. - Mathew 22 37-39 • To become a blessing to others

11. Who is in control? • No one can serve two masters. Either he will hate the one and love the other or he will be devoted to the one and despise the other. You cannot serve both God and money - Mathew 6:24 • Money has demonically usurpedthe role in modern society which the Holy Spirit is to have in the church.

12. Is money your treasure? • Do not store up for yourselves on earth, where moths and rust destroy, and where thieves break in and steal - Mathew 6:19 • People who want to get rich fall into temptation and a trap and into many foolish and harmful desires that plunge men into ruin and destruction. For the love of money is a root of all kinds of evil. Some people eager for money, have wandered from the faith and pierced themselves with many griefs. - 1 Tim 6:9-11

13. Guard your heart • Above all else, guard your heart, for it is the wellspring of life - Proverbs 4:23 • I seek you with all my heart; do not let me stray from you commands - Psalms 119:10 • The sacrifices of God are a broken spirit; a broken and contrite heart, O God, you will not despise - Psalms 51:17

14. What leads to prosperity? • My son do not forget my teaching, but keep my commands in your heart, for they will prolong your life many years and bring you prosperity - Proverbs 3:1-2 • Blessed is the man who finds wisdom, the man who gains understanding for she is more profitable than silver and yields better than gold. She is more precious than rubies; nothing you desire can compare with her. Long life is in her right hand; in her left hand are riches and honor - Proverbs 3:15,16

15. What brings poverty? • Dishonest money dwindles away, but he who gathers little by little makes it grow. - Proverbs 13:11 • Lazy hands make a man poor but diligent hands bring wealth - Proverbs 10:4 • He who loves pleasure will become poor; whoever loves wine and oils will never be rich. - Proverbs 21:17

17. PHILOSOPHY OF THE BUCKETS

18. ‘To become financially worry-free is not an impossible goal. Through a common sense approach, one can achieve this aspiration by working at it systematically’.

19. ASSET ALLOCATION • What is it? It is the process of deciding how to distribute investor’s wealth among different classes. Examples of Asset Classes are; • Cash • Stocks • Bonds • Real Estate • Each Individual Investor will have a plan that varies dependent on age, financial status, future plans, risks and needs. Ensure that the investment portfolio is suited to YOUR REQUIREMENTS and not those of the financial advisor/planner.

20. ASSET ALLOCATION : KEY TO LONG TERM FINANCIAL SUCCESS There are two primary types of vehicles for investments; • Fixed Income. Examples: • Money Market Fund • Treasury Bill • Treasury Bonds • Growth.

21. 3 CHOICES FOR ASSET ALLOCATION • Security Bucket • Investment Bucket • a) Buy and hold • 3. Dream Capital Bucket • Asset allocation requires that you fill bucket I first, • then bucket II, then bucket III

22. 3 CHOICES FOR ASSET ALLOCATION IF YOU ARE UNDER 40 YEARS. If you are aggressive If you are conservative SECURITY BUCKET T.B Invest 30% Invest 40% Bonds Pension Insurance(s) Money markets BUY & HOLD BUCKET Shares Invest 35% Invest 30% Bonds Real Estate GROWTH BUCKET MOMENTUM BUCKET Invest 35% Invest 30%

23. 3 CHOICES FOR ASSET ALLOCATION IF YOU ARE BETWEEN 40 - 50 YEARS. IF YOU ARE BETWEEN 40 - 50 YEARS. If you are conservative If you are aggressive SECURITY BUCKET T.B Bonds Invest 60% Invest 50% Pension Insurance(s) Money markets BUY & HOLD BUCKET Invest 25% Shares Bonds Invest 20% Real Estate GROWTH BUCKET MOMENTUM BUCKET Invest 25% Invest 20%

24. 3 CHOICES FOR ASSET ALLOCATION IF YOU ARE OVER 50 YEARS. If you are aggressive If you are conservative SECURITY BUCKET T.B Invest 65% Invest 70% Bonds Pension Insurance(s) Money markets BUY & HOLD BUCKET Shares Invest 17.5% Invest 15% Bonds Real Estate GROWTH BUCKET MOMENTUM BUCKET Invest 15% Invest 17.5%

25. INVESTMENT THEORY & PRACTICE

26. CONSTRUCTING AN INVESTMENT PORTFOLIO

27. CONSTRUCTING AN INVESTMENT PORTFOLIO High Risk = High Returns Low Risk = Low Returns Low Risk High Risk Stability of principal Income Income growth Capital appreciation Before embarking on an investment plan, ensure that you the investor have  a) Insurance b) Adequate Cash Reserve

28. CONSTRUCTING AN INVESTMENT PORTFOLIO To lower your risks in shares investment: Diversify into different sectors of the economy: Agriculture; • Industrial and allied; • Financial; • Commercial and Services.

29. Efficient Frontier for Risk Securities Expected Return 100% Investment in security with Highest E(R) All portfolios on the line are efficient. Portfolios that are dominated lie below The Efficient Frontier. 100% investment in Minimum Variance Portfolio Variance

30. STOCK MARKET INDICATORS

31. STOCK MARKET INDICATORS

32. PERFORMANCE REVIEW

33. MARKET ACTIVITY • The total turnover in the equity market was Kshs. 15.2 billion in 2003, 22.3 billion in 2004, 36.52 billion for the year 2005, Kshs 94.95 billion for the year 2006, compared to Kshs 105.26 billion for 2007. • Turnover this year is expected to be above Kshs 200 billion, due to increased level of activity in the market occasioned by the listing of Safaricom.

34. HOW TO INVEST THROUGH BUY & HOLD BUCKET • THREE OVERALL SYSTEMS OF EVALUATION • Guess and Gamble • a) Hot Tips • b) Your brother-in-laws coaching • c) Information from your broker that you fail to evaluate. • Bottom up COMPANY SECTOR ECONOMY

35. HOW TO INVEST THROUGH BUY & HOLD BUCKET THREE OVERALL SYSTEMS OF EVALUATION 3. Top Down. ECONOMY SECTOR COMPANY

36. THE ECONOMY KEY CHALLENGE! • Creating 8 million jobs for the youth in the next 5 years

37. The youth bulge – Kenya’s population age structure At 2003

38. Globally, youth bulge exerts great pressure on societies For example • Germany: • Expulsion of parts of the population to create opportunities for the youth • Consequences - World War 2 • UK: • Imperialism as a coping mechanism

39. The youth bulge in Kenya is a time bomb….. • > 50% of convicts are aged 16 to 25 years • 67% of all those who are unemployed are between 15 and 30 • Over 60% of new HIV infections are among the youth • 92% of those unemployed (especially youth) have no vocational or professional skills training • The youth were the militia in the recent political crisis • the lack of opportunities to earn a DECENT and HONEST living is what drives young people into crime and drugs, and into a general state of hopelessness and despair

40. ….. but potentially also a great opportunity • Abundant and young labour force is a long-term economic growth driver • If 2 million unemployed young people could be given jobs, and produce at half the average industrial output per worker, they would add KShs 250 billion to GDP (or 20% of current GDP)

41. Quantifying the jobs deficit

42. Demographic summary, 2006 • 0-14 years of age are 41.9% of population, with 14.8 million children in school primary and secondary school pipeline to 2012 • 15-24 years of age are 22.5% of population, with 8 million in search of jobs over next five years • 25-34 years of age are 13.4% of population, with 2.44 million who must have decent jobs now • Decent job creation challenge therefore is nearly 10 million decent jobs between now and 2012!

43. Key Education Indicators • National Primary Completion Rate was 86.5 percent in 2006 • Transition Rate to Secondary Education was 60 percent in 2007 • Transition Rate to University Education was 5.7 percent in 2003 and nearly 8 percent in 2007.

44. Enrolment Situation • In 2006, there were • 7,705,335 children aged between 6-13 years i.e. primary school going age • 3,665,751 children aged between 14-17 years i.e. secondary school going age • We therefore have 11.37 million aged between 6-17 yrs who should be in school • However, 691,000 of these children had never stepped into school and may grow up without any form of education.

45. Primary 1.62 million who come in and out despite free primary education Most affected regions are NEP 50.5% Coast 29.5% Rift Valley 25.1% Western 25.1% Nyanza 17.9% b)Secondary 3 million not in secondary school but free secondary education should begin to mop up some of them Most affected regions are as follows NEP 93.2% Coast 89.4% Western 87.4% Rift Valley 86.4% Eastern 84.9% Children Not Attending School

46. A. Primary Schools Nationally the number was 1,618,120 in 2006 Nairobi 45,859 Central 100,205 Coast 212,694 Eastern 195,099 NEP 162,260 Rift valley 495,703 Western 198,374 B. Secondary Schools Nationally the number was 3,002,250 in 2006 Nairobi 103,800 Central 318,844 Coast 307,080 Eastern 538,682 NEP 108,923 Nyanza 452,009 Rift Valley 780,029 Western 433,735 Children aged 6-17 not in school

47. Employment Picture 2006

48. More Assumptions • Assume that two thirds of all those not employed in the formal and informal sector are fully engaged in agriculture, livestock and fishing, i.e., about 8 million • Further assume of 20 million over 15 yrs, at least 10% are disabled enough not to be able to work, i.e., about 2 million • We will still have 2 million people that have no access to any form of employment at all, not even disguised unemployment on the farm or street.

49. The Challenge…1 • School pipeline ready to preparing to disgorge 14.9 million potential entrants to labour force beginning 2012; • 8 million youth aged 15-24 already in market, with only 1.5 million in secondary school, colleges, and universities leaving 6.5 million on labour market; • 2.44 million young adults 25-34 on market, looking for decent jobs with life prospects • Total, of over 10 million young people in labour, of whom 2 million cannot read and write therefore unemployable leaving 8 million employable youth looking for good jobs with prospects between 2008 and 2012.

50. The Challenge…2 • Can Kenya deliver jobs to these young people? • What must be done to create the necessary formal jobs? • What are the consequences of success? • What are the consequences of failure?