The sad state of the economy affects every one of us – it’s a global issue. So too has the Corona Virus – it’s a global pandemic. The outcome is that every one of us has been hit by the coronavirus economic impact, and hit really hard; both collectively as a society and (financially speaking) as individuals too. Joint income middle-class homes, who have had, up until now, managed their finances and debt load responsibly, are now faced with the loss of one of the incomes mainly due to COVID-related retrenchments.
A nation’s economic challenge now becomes dealing with the resulting debt load (for the consumer) as well as the enormous cash flow impact of bad debt on the creditors (and the entire up-stream production value chain). Novel & creative solutions are required by all of us, as stakeholders in the economy, to address this unforeseen & unpredictable (debt-driven) economic crisis.
We have to accept the harsh reality that consumer spending is going to stabilise at a lower base for the predictable future, even taking into account the huge growth in online retail. However, since a large part of consumer spending is credit-driven, the up-stream production value chain in the economy is pinning its survival on the cash flow from its extensive base of existing credit repayments – for goods & services already provided!
Just as business councils and chambers of commerce are engaging governments all around the world over economic relief programs, so too, must consumer councils and consumer groups engage with the consumers. These consumer-focused messages must be on the need for responsible debt management. It must emphasise the main resource available to consumers to help them through this crisis – debt counseling. This message needs to be broadcast to the masses, by being media-driven (social media, radio, television, billboard, print). It has to be a combined effort by the government, consumer councils, and the business sector. The targeted outcome of this campaign should be a single message – debt counseling can be accessed long before consumers are faced with creditors’ threats, court orders, garnishees & repossessions.
Our consumer-driven economic model is structured in such a manner, that any economic stability (and subsequent recovery) has to be bottom-upwards driven. It must always start with the consumer. The various economic stimulus packages by world governments, in all their forms, are designed to increase consumer activity – in spending on new products as well as servicing the debt on historical purchases. One of the tools used in achieving this change in consumer activity is through the lowering of interest rates. This significantly reduces the cost of servicing debt. Within this effort, the debt-counselling sector has a key & fundamental role to play in that it needs to drive cost-effective (most importantly) and carefully considered approaches, to minimise the debt-driven impact on an already fragile economy.
How do we nip the problem in the bud? This is one of the strategies that we at The Pioneer Group are examining. We want to manage the consumer’s debt situation before it becomes a problem. Our message is simple – debt counselling is not the last resort solution, but rather, a first-choice option. By focusing on the positive financial impacts of debt counseling, and making consumers realise that.
Our aim is to draw consumers into the debt counseling system long before creditors, court orders, garnishees & repossessions force them to come to us. Part of our marketing strategy is to create awareness on the positive financial impacts of debt counseling, as well as informing & educating consumers that debt relief can be sought long before their debt situation becomes overwhelming. The idea is to encourage consumers to reach out to us at the first hint of trouble – before the creditors’ threats of court orders, garnishees & repossessions become a possibility or reality.
A large number of families may be surviving, but this is at the detriment of their medium and long-term savings. Consumers are tapping into their savings in order to service debt. At The Pioneer group, we believe that responsible consumers, who have worked hard to build little savings cushions and nest eggs, should not be punished or penalised for an economic situation that is not of their own doing. After all, we’re in this together…