Benel D. Lagua l September 1, 2022 l Manila Bulletin
Teaching finance courses in the country’s blue and green universities, I realize how many of the key concepts are validated in the Holy Scriptures. In basic finance, there are three fundamental analytical pillars: time value of money, risk management and asset valuation.
Let me start by citing Greg Laurie who wrote how money is a very important topic in the Holy Bible. According to his review, it is the subject of nearly half of the parables of Jesus Christ. It is covered in one out of every seven verses in the New Testament. The Bible offers 500 verses on prayer, fewer than 500 verses on faith and more than 2000 verses on money. And 15% of everything Jesus taught was on the topic of money and possessions – more that his teachings on heaven and hell combined.
The concept of time value of money in finance is clearly embedded in the parable of the talents and how the return of the same number of talents by one servant who merely hid what was assigned to him totally displeased his master. Talent, by the way, was a unit of currency in those times. While the parable can be interpreted in many ways, at its core, the master expected that the money should have been deposited at the least with bankers and earn some interest. Because of inflation, opportunity cost and uncertainty, talents cannot be allowed to stay stale because of time value.
In Proverbs 22:3 – “A prudent person foresees danger and takes precautions. The simpleton goes blindly on and suffers the consequences.” This is a very clear instruction to manage risk and uncertainties. The simpleton or foolish person fails to consider risk while the prudent and wise person takes adequate precautions. Risk management, after all, is the process of formulating the benefit-cost trade-offs of risk reduction and deciding on the course of action to take (including the decision to take no action at all). The risk management process can be broken down into five stages: risk identification, risk assessment, selection of risk management techniques, implementation and review.
The final analytical pillar of asset valuation is a little tricky as the biblical meaning of value is about what is important in one’s life. An asset’s value, in finance, is the price well informed investors must pay for it in a free and competitive market. In the realm of worth, the bible puts the highest value on human life. Yet, money matters still count.
Gary Inrig in the book: “Your Money Matters” cited parables Jesus share in his ministry on earth which involved financial examples and how we should view money and wealth. One of those is the parable of the shrewd manager or the dishonest steward. Some of the gems from that parable are as follows: we must recognize the limits of wealth because at the end of the day, when we die, we cannot bring anything from this world. Money is powerful but limited and temporal.
Still, money is important to living and should be invested wisely. The Lord calls us to use money properly. Proverbs 21:5 – “The plans of the diligent lead to profit as surely as haste leads to poverty.” It is virtuous to preserve wealth or even grow it.
A corollary guide is the advice to diversify your investments. It makes sense to place wealth in as many different investment baskets – cash, stocks, bonds, property, commodities, etc. Ecclesiastes 11:2 highlights this: “Invest in seven ventures, yes, in eight; you do not know what disaster may come upon the land.”
Investing money, creating a business, working to make a living, while applying finance principles, are all in the Holy Scriptures. The caveat is we need to understand that our material wealth is not ours at all. We are stewards, not owners. If we use our present possessions as if they belong to us, we are acting exactly like a dishonest steward. We are owners of nothing, stewards of everything. Proper stewardship of money prevents bondage to money.
What we possess is to be used to further the master’s purposes and goals. The primary value of earthly wealth is that it is a tool to train us to handle “true riches”. This includes opportunities to serve the Lord in furthering His purposes on earth.
My staff who, by the way is of another Christian faith, loves to quote from Ecclesiastes which asserts that money is a protection just like wisdom. One may have money to buy all sort of luxuries in the world but when sickness comes, can the luxuries preserve life? Not at all. But if one secures money and saves part for emergencies and contingencies, it may be deployed to address sickness in life. That is wisdom in using one’s wealth.
Being rich is not bad; rather being obsessed to be rich is. For both rich and poor can be victims of greed if they will not put into proper perspective their viewpoint about money. She quotes: “Money is the root of all sorts of injurious things and those determined to be rich has been led astray from faith and have stabbed themselves with so much pain.”
The concepts of finance are all acknowledged in our faith. What matters most though is using these principles to make a positive difference in this world, for a more noble, eternal purpose.
*** (Benel Dela Paz Lagua was previously Executive Vice President and Chief Development Officer at the Development Bank of the Philippines. He is an active FINEX member and an advocate of risk-based lending for SMEs. The views expressed herein are his own and does not necessarily reflect the opinion of his office as well as FINEX.)