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How Does Investment Culture Develop in Underdeveloped Nations?

It's all about word of mouth. Show what people can do, and people will apply.

By Giorgi MikhelidzePublished 5 years ago 5 min read

You’ve most likely seen quite a lot of ads about investments and trading, if you’ve Googled “What is a stock” at least once in your lifetime. The bad news is that Google takes this as your desire to enter the financial market, and then proceeds to bombard you with relevant ads.

It may get annoying sometimes, but in most cases, it’s quite relevant if you’re actually looking for good options.

However, 99.9 percent of the time, you see an ad where an already-successful person is talking about their daily routine. And around 90 percent of those times, it’s a Caucasian man, living somewhere on the Mediterranean with his yacht.

This creates an illusion that only people from Europe or North America like to speculate on stock exchanges or various other financial markets, but that can’t be further from the truth. The volume of people involved in this industry may be a bit bigger in these countries simply due to the population, but the real popularity is showcased in underdeveloped nations, where people are looking for an easy way out of poverty.

Where is investment culture the most popular?

As I mentioned, investment culture is very popular in developing nations, but which developing nation do I have in mind?

Well, there are a couple of them, but most of them seem to be in Africa. Countries like Nigeria, Uganda, Kenya, and most importantly South Africa, are usually the ones most responsible for Google Trends search volumes, and overall interest.

But, why is this so? What determines the popularity of investments in these countries? Well, let’s take a look at the example of South Africa, and how Forex (foreign exchange) managed to boom so easily in this region.

The popularity of Forex in South Africa

Forex hasn’t always been too popular in South Africa. In fact, it can be said that it’s been around seven or eight years since the first real headlines about SA Forex trading came to be.

You see, the people in this country don’t necessarily have the funds to access some of the more demanding Forex brokers from abroad. For example, the minimum deposit is usually $250, which is the average monthly salary in the country for most residents.

Throwing a whole month’s salary into something so risky didn’t necessarily seem like a good idea, until South African Forex brokers started to enter the market. These companies would understand the local reality much better, and would offer a bit more personalized options for the local clientele.

One of the examples is that the lower labor costs would allow brokers to open up shop much more easily, as they didn’t have to spend that much. Once this became a trend, the government started working on a comprehensive financial regulation, which was mostly derived from their biggest business partners such as the Netherlands and the United Kingdom.

Overall, the regulation was much more advantageous for licensed South African Forex brokers than any other country, simply because the regulator took the education of the traders on itself.

Once the education started to spread, more and more people started hearing about the industry in general, but still weren’t very convinced.

The spark that started it all

Think about the advertisements that you see about not only investments, but also for things like gyms or fitness plans. Almost in all of the cases, the advertisers try to show you the end-product of their services. But, sometimes it’s impossible to see those results in real life.

Well, there was a case in South Africa where some young investors managed to make millions of dollars on the FX market, when the local currency, the South African Rand, started to become extremely volatile.

Seeing their peers make millions of dollars in profits convinced thousands of South Africans to start investing in the industry, right then and there.

Most of them failed, of course, simply because they didn’t have the necessary education to know when to open a trade and when to close it, but there were some successes here and there. Those who were successful opened up institutes to teach about trading, and overall, the industry managed to conquer the whole country.

Now, we have hundreds of South African Forex influencers in the country that manage to make thousands on just one trade, and showcase it to their followers.

In a sense, the FX market managed to become popular through the power of word of mouth.

Contradiction in Ghana

Another amazing example is Ghana, where the popularity of investments started for all the wrong reasons.

What do I mean the wrong reasons? Well, there’s this thing called Sakawa in Ghana. And, those involved in it are usually called the Sakawa boys.

"Sakawa" is a local term for something of a lifestyle, but a familiar translation for us would be “scamming the unaware."

Yes, we’ve definitely heard of people receiving emails from African princes, requesting a deposit before their whole fortune is transferred to the person. But, very few know that Sakawa also entailed scamming people through investments.

The activity made the scammers rich beyond measure for the local economy, and therefore got the attention of not only the local population, but also the local news. The scammers were not apprehended by the government, simply because they were bringing quite a lot of funds to the local economy, and helping it bit by bit.

But, those who witnessed how Sakawa made people rich either started to make their own versions, or just got involved into legit trading straight away.

Over time, as Sakawa became more noticeable all over the world, the Sakawa boys were driven out of business, and those who were doing legitimate trading remained.

Once again, through the word of mouth, the investment culture persevered, and Ghana is now hoping to quite a lot of traders.

What are the takeaways of this article?

The takeaways are that, even though an underdeveloped market does not have the resources that a developed one may have, at least it has the interest and the passion of the customer, in which the company can participate to enhance.

A simple display of the final product of trading is enough to get these people interested in trading with you, which is why the local governments are placing restrictions on these ads.

As long as a company is a licensed entity, and showcases the outcome of hard work and luck in the financial markets, they’re guaranteed to have a large clientele in any underdeveloped country they go to.


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