Financial goals are what drives us to greater heights.
Net worth or wealth, defined as the value of financial assets plus non-financial assets (principally housing) owned by individuals less their debts, is a topic that gets lots of attention.
Needless to say, we are all motivated somewhat by financial goals and the desire to better ourselves economically. It’s no wonder wealth reports make such good fodder for public debate.
Today, allow me to share some quick insights derived from one report – the 2018 Global Wealth Report by Credit Suisse. Though mostly confirming the expected – the world is unequal.
The bottom half of the global population owns less than one percent of global wealth while the richest one percent account for nearly 50 percent of global assets.
The report also makes some noteworthy observations. Here are a few. One, nowhere in the world is wealth disparity more striking than in Africa.
According to the research, more than half of the African population is concentrated at the bottom end of the wealth spectrum. In fact, in some African countries, the percentage of the population at the base of the wealth pyramid is close to 100. It seems for many, life membership at the “base” is the norm rather than exception.
What’s interesting is that despite all this poverty, some Africans appear amongst the top 10 percent of global wealth holders, and even among the top one percent.
Altogether, the continental wealth accounted for less than one percent of the global wealth (same as 2010). Is this a failure of pro-poor policies perhaps? Or is this the manifestation of a “man-eat-man” society? Is it a personal issue?
Two, financial assets accounted for the biggest position (54 percent) in the global wealth portfolio. A leading example here is the US where financial assets make up as much as two-thirds of the portfolio compared to non-financial assets.
This is relevant to us considering the majority of Kenyans have a substantial percentage of their household assets held in land and houses. In a way, this has a lot to say about our stage in development. The report noted that in developing countries, it’s common for 80 percent or more of total assets to be held in the form of non-financial assets. As countries develop and grow, the importance of non-financial assets tends to decline.
Three, the report noted that debt as a proportion of total household assets tends to be low in developing countries because financial intermediation and property rights are underdeveloped, while debt levels in developed countries are relatively high, reflecting a much more developed financial system.
Indeed, in 2018, Africa’s household debt levels declined compared to all the regions covered in the report. Takeaway here is that we should expect debt levels to increase over time as the continent’s financial system becomes more established and formalised.
Overall, the report contained very valuable insights. Well, some were simply hilarious — did you know to be among the wealthiest half in the world, one only needs Sh450,000 in net assets? And do you have more than Sh9.3 million in net assets? If yes, then you’re part of the top 10 percent of global wealth holders. Have more than Sh83 million in wealth? If yes, then you’re part of the one percent, the root problem for everyone.
PAYE Tax Calculator
Note: The results are not exact but very close to the actual.
