Managing Director of EDC Investments Ltd, Paul Kofi Mante, says strategic borrowing can help build wealth, while emotionally driven loans often result in financial stress, underscoring the need for purpose and value creation when taking credit.

Speaking on the Joy FM Super Morning Show on Thursday, February 5, Mr Mante said the focus should not be on avoiding loans altogether, but on understanding their purpose and long-term financial impact.

“Borrowing is stable. When you look at strong economies and big economies, there is a lot of borrowing,” he said.

According to him, the key difference between financial growth and financial distress lies in how borrowed funds are utilised.

“Smart borrowing builds wealth. Emotional borrowing builds stress. If you borrow without a plan, you build stress. But if you borrow smart, you will build wealth,” Mr Mante stated.

He explained that before taking any loan, borrowers must ask a critical question.

“You have to ask yourself: will this loan put money in my pocket or take money out of my pocket? Is it value addition or value subtraction?” he said.

Using practical examples, Mr Mante noted that loans taken to expand income-generating activities are more likely to yield positive outcomes.

“When a seamstress buys an extra sewing or knitting machine to increase cash flow, that is productive borrowing. When a trader borrows during the Christmas season to stock goods and make more sales, that is also productive borrowing,” he explained.

He added that timing and strategy play a crucial role, especially for small-scale traders.

“If you borrow ahead of the rainy season to stock umbrellas or wipers, knowing demand will rise, that makes sense. If a driver takes a loan to buy a car and repays it within a short period, that also makes sense,” he said.

Sharing a personal experience, Mr Mante cited his decision to take a mortgage as an example of long-term value creation.

“I took a mortgage to buy a house and finished paying for it in seven years. When you pay rent, that money is gone forever, but every mortgage repayment was helping me own the house,” he noted.

He further cautioned young people against prioritising lifestyle choices over asset building, recounting the story of a wealthy man who chose to pass on investments rather than luxury items to his children.

“The children had strong investments and significant resources working for them, yet they lived modestly. Wealth is built through assets, not appearances,” he said.

Mr Mante concluded by urging the public to approach borrowing with discipline and clarity, stressing that loans should serve as tools for financial growth rather than sources of long-term pressure.