A middle-class Kenyan is anyone who spends between Sh23,670 and
Sh199,999 a month. All indications are that Kenya’s middle class is made
up of big spenders. PHOTO | FOTOSEACH
The measure of a robust economy is defined by a growing middle class, the aspirational citizens.
According
to the Kenya National Bureau of Statistics (KNBS), a middle-class
Kenyan is anyone who spends between Sh23,670 and Sh199,999 a month. All
indications are that Kenya’s middle class is made up of big spenders.
DEBT CYCLE
One
only needs to take a stroll through the malls in Nairobi and major
towns to witness the spending habits of this class. They also drive big
cars, eat expensive food and still have enough to go on holiday. In
addition, their children go to expensive private schools and attend
after-school extra-curriculum activities. The question is: Where is the
money to fund this social status coming from?
The
most recent economic survey by KNBS (2019) states that loans and
advances from banking institutions increased by 12 per cent to Sh442.3
billion in 2018 from Sh358.6 billion in 2017.
At
the same time, total liabilities by Savings and Credit Cooperatives
(Saccos) increased by 11.5 per cent from Sh307.0 billion in 2017 to
Sh342.3 billion in 2018. Meanwhile, loans and advances increased by 12
per cent from 320,494 million in 2017 to Sh358.6 billion in 2018
Clearly, Kenyans are borrowing as fast as they are saving, indicating that the middle class is borrowing to fund its lifestyle.
Dr
Gladys Nyachieo, a sociologist and senior lecturer at Multi-Media
University, says that where one lives, where one’s children go to
school, and what car one drives determine their status.
“Many
Kenyans are living a life they cannot afford, this is why you have
children in a school bus at 4am to get to a particular school in the
suburbs. There is too much societal pressure to maintain the status quo
attached to being middle class, forcing people to trap themselves in a
cycle of unending debt, even with a reasonable salary. We end up
hustling and struggling harder than those who form the lower classes
just to dress, look or own certain things. Credit is supposed to
facilitate development, not cripple you,” she says.
REALITY CHECK
Dr
Nyachieo adds that although socially, change must occur for people to
evolve, today’s society has moved away from the communal space to an
individualistic one.
“As we seek a
certain lifestyle, we are all in competition with one another and the
family unit is crumbling as a result. Corruption will get worse, there
will be more cases of crime, stress-related diseases, violence, suicide
and increased vices. These are some of the social outcomes of being
stuck in the continuing cycle of debt.”
At
the beginning of last month, the Organisation for Economic Co-operation
and Development (OECD) released a report titled: Under Pressure: The
Squeezed Middle Class. It states that in most OECD countries the middle
class has shrunk since it has become more difficult for younger
generations to make it to the middle class, defined as anyone earning
between 75 per cent and 200 per cent of the country’s median national
income.
Although Kenya is not part of
the OECD concentration, one can argue that we are facing the same
predicament. On a global scale, middle incomes are barely higher today
than they were 10 years ago, increasing by just 0.3 per cent per year, a
third less than the average income of the richest 10 per cent. One of
the best routes to get to the middle class, says XN Iraki, an economist,
is a good education, justifying the chase for expensive schools or
taking a Helb loans for university studies.
“Education
is how the sons of the peasants become CEOs. Education should be
accessible to all citizens irrespective of their family background.
That’s why free primary to high school is important.
But
it is not just general education, skill matters. What can you give the
market? There is a good economic case to subsidise education. On taking
up Helb — it’s an egg and chicken situation. We need to grow the economy
to create jobs so that we can pay Helb loans.”
ASPIRATIONAL
Financial capital is another key indicator of a healthy economy, and the need for credit cannot be diminished.
Addressing
the burden of lower disposable incomes, Iraki says; “Unfortunately we
learn to spend money before we learn to earn it. We need to reduce the
cost of capital. One simple way is to have more banks so that
competition reduces the cost of borrowing. The interest rate cap has not
worked. As a country, we must learn to save. We need savings to
facilitate investment and avoid (impractical) borrowing. That is how
China and Korea developed.”
In an
ideal scenario, Dr Nyachieo says, a healthy middle-class Kenyan can
afford their basic needs, lives within their means and has money left
over after all arising monthly expenses for savings. It is from these
savings that investments which lead to wealth can be made.
“There
is a need to address this unhealthy aspirational culture most of us are
stuck in. Self-awareness is the key at the end of the day. There is
nothing wrong with being aspirational, but our society needs to move
away from glorifying the ‘quick-fix’ route to making it in life. The
other day we were talking about the issue of betting. Borrowing is
highly addictive, something people don’t realise.”
She
concludes, “We need to start teaching these lessons from the base
family level. Teach children that what you have is yours, that they need
to work for their own. And that it is okay not to have all the shiny
things the neighbour has today — they can work towards them slowly. Our
education curriculum also needs to be looked at. We are not
realistically equipping children for the future. Are they learning the
value of financial literacy or community?”
No comments :
Post a Comment