Published: 12:19 AM, 09 April 2026
Rich or Risky? The Paradox of High Income and High Debt
A man earns Tk 5 lakh per month. On paper, this is a respectable income in Bangladesh. Yet he carries Tk 5 crore in debt. At first glance, the numbers seem alarming. The debt-to-income ratio appears astronomical. Conventional prudence would label him overleveraged, exposed, even reckless. But lenders are not worried. The loans are regularly serviced. Installments are paid on time. Cash flows remain stable. Is he rich? Is he financially included? Or is he a walking moral hazard?
Modern finance compels us to rethink the meaning of wealth. Wealth is no longer simply accumulated savings; it is the ability to command resources today against future income. In a credit-driven economy, leverage is not necessarily a sign of weakness. It may be a sign of trust. The man with Tk 5 crore in liabilities is also a man whom banks believe will earn tomorrow. His debt is not merely an obligation; it is a certificate of credibility.
Financial inclusion is often measured by access to credit, payment systems, insurance, and formal banking. By that definition, he is deeply included. He is not operating in the informal margins of the economy. He participates in structured lending markets. His income flows through documented channels. His financial profile is visible to institutions. The banking system recognizes him. That recognition itself is a form of economic citizenship.
But does inclusion equate to wealth? Not necessarily. Wealth is a balance-sheet concept. It is assets minus liabilities. If his Tk 5 crore debt is backed by appreciating assets - land, business capital, productive machinery, rental properties - then leverage may amplify prosperity. If, however, the debt funds consumption, status display, or unproductive ventures, the balance sheet becomes fragile. In that case, high income merely masks vulnerability.
This is where the idea of moral hazard enters. Moral hazard arises when an individual takes excessive risk because the downside is borne by someone else. If the borrower believes that lenders will always refinance, restructure, or extend further credit, incentives may shift. Risk appetite expands. Prudence declines. Yet moral hazard is not automatic. It depends on institutional behavior. If lenders assess risk rigorously, price loans appropriately, and enforce discipline, leverage becomes a tool rather than a trap.
The intriguing feature in this scenario is lender confidence. Why are lenders unafraid of a Tk 5 crore exposure? Because debt sustainability is not about size alone; it is about serviceability. If the monthly installment is manageable relative to Tk 5 lakh income, and if the income stream is predictable, then even large debt can be stable. In corporate finance, firms often operate with leverage multiples far exceeding individual ratios. What matters is the coverage ratio - the margin between income and obligations.
In fact, leverage can be a sign of economic dynamism. A stagnant individual with no debt may be risk-averse but also growth-averse. An entrepreneur with significant borrowings signals ambition. The banking system exists precisely to transform future earnings into present investment. Without debt, expansion stalls. Credit is the oxygen of modern growth.
However, leverage also magnifies shocks. Suppose income declines due to macroeconomic slowdown, regulatory change, or sectoral disruption. Suppose interest rates rise sharply. Suppose liquidity tightens. High debt compresses flexibility. The borrower becomes sensitive to variables beyond his control. Financial stability is not judged in good times but in stressed scenarios. The real test of wealth is resilience.
There is also a psychological dimension. A person earning Tk 5 lakh with zero debt may feel secure but constrained. A person earning Tk 5 lakh with Tk 5 crore debt may feel pressure but empowered. Debt creates discipline. Installments impose structure. Many high-performing economies - from the United States to Japan - operate on systemic leverage. Household mortgages, corporate bonds, and sovereign debts are embedded in economic life. The question is not whether debt exists, but whether it is productive.
In Bangladesh, the narrative around debt is often moralistic. Borrowing is equated with weakness unless undertaken by the state or large corporations. Yet microfinance taught us that even small borrowers can manage credit responsibly. At the other end of the spectrum, large borrowers shape industrial capacity. Between these poles lies the emerging middle and upper-middle segment - professionals and entrepreneurs whose balance sheets are expanding. They represent a new form of financial inclusion: integrated, leveraged, growth-oriented.
Are you rich? If richness means high disposable surplus after servicing obligations, then the answer depends on your coverage margin. If monthly installments consume only a modest share of Tk 5 lakh, leaving room for savings and reinvestment, then leverage enhances your net position. If installments absorb most of your income, wealth becomes illusory. Richness is not gross income; it is retained capacity.
Are you financially included? Undoubtedly. Access to Tk 5 crore credit implies institutional trust, documentation, and integration into the formal financial ecosystem. Many citizens remain excluded from such channels. Inclusion, however, is a double-edged sword. It grants opportunity but also binds one to systemic discipline. You are included not only in credit markets but also in risk transmission channels.
Is your debt a moral hazard? Potentially - but only if incentives distort behavior. If you believe your scale protects you from consequences, risk-taking may escalate. But if your lenders price risk properly and enforce repayment norms, then the hazard diminishes. In fact, the greater moral hazard may lie with lenders who, driven by competition, extend excessive credit assuming continued income stability. Prudence must be bilateral.
The broader macroeconomic implication is equally compelling. An economy where lenders are comfortable with large borrower leverage reflects either strong confidence or complacency. If asset markets are rising and liquidity abundant, optimism prevails. But cycles turn. Sustainable credit culture requires transparency, realistic valuation, and contingency planning.
Ultimately, wealth is about optionality - the freedom to choose. If your debt restricts your choices, you are not rich regardless of income. If your leverage enables expansion, diversification, and asset accumulation, you are strategically positioned. The distinction lies in asset quality and risk management.
There is a paradox here. Very high debt that is easily serviced may reduce immediate pressure. Lenders’ comfort can lull the borrower into complacency. Yet true financial maturity lies in preparing for scenarios where comfort disappears. Building liquidity buffers, diversifying income streams, hedging interest rate risk - these convert leveraged status into sustainable wealth.
In philosophical terms, debt is neither virtue nor vice. It is a contract across time. You borrow tomorrow’s income to build today’s capacity. If tomorrow materializes as expected, debt becomes a bridge. If tomorrow falters, debt becomes a burden.
So, are you rich? Perhaps not yet in a net-asset sense. Are you financially included? Absolutely. Are you exposed to moral hazard? Only if you neglect risk. The real measure of prosperity is not how large your debt is, nor how impressive your income appears, but how resilient your balance sheet remains under uncertainty.
In modern economies, leverage is common among the ambitious. The key is not to eliminate debt but to master it. Debt should work for you, not you for debt. When leverage funds productive assets, strengthens income generation, and remains within disciplined coverage ratios, it becomes a catalyst. When it finances consumption or speculative excess, it becomes a trap.
The man earning Tk 5 lakh with Tk 5 crore debt stands at a crossroads between confidence and caution. If he manages risk wisely, maintains buffers, and treats credit as a tool rather than entitlement, he is not merely financially included - he is financially strategic. Wealth, after all, is not the absence of debt. It is the presence of control.
And control comes not from the size of income or the scale of borrowing, but from the wisdom with which both are managed.
Mehdi Rahman works in the
development sector. He also
writes on foreign trade and
monetary issues.
