 | Summaries and Customer Reviews are supplied by Amazon.com | About forty percent of the world's people live on incomes of two dollars a day or less. If you've never had to survive on an income so small, it is hard to imagine. How would you put food on the table, afford a home, and educate your children? How would you handle emergencies and old age? Every day, more than a billion people around the world must answer these questions. Portfolios of the Poor is the first book to explain systematically how the poor find solutions. The authors report on the yearlong "financial diaries" of villagers and slum dwellers in Bangladesh, India, and South Africa--records that track penny by penny how specific households manage their money. The stories of these families are often surprising and inspiring. Most poor households do not live hand to mouth, spending what they earn in a desperate bid to keep afloat. Instead, they employ financial tools, many linked to informal networks and family ties. They push money into savings for reserves, squeeze money out of creditors whenever possible, run sophisticated savings clubs, and use microfinancing wherever available. Their experiences reveal new methods to fight poverty and ways to envision the next generation of banks for the "bottom billion." Indispensable for those in development studies, economics, and microfinance, Portfolios of the Poor will appeal to anyone interested in knowing more about poverty and what can be done about it. |
Average Customer Rating:   This book wasn't what I expected Not an easy read. This book is more a text book than a description. Thoughtful, provocative, and insightful. A must read! Having worked in economic development for some time now, I have grown accustomed to studies concerning the use of capital by the global poor being stated in simply academic terms. Portfolios of the Poor though, brings the human element back into economics and gives a more intuitive understanding of the financial challenges that people face in their daily lives. Funerals, weddings, failed health, loss of employment, religious celebrations, purchase of a new home... all of these require significant investments and require diverse access to capital. This book not only describes how people react to those challenges, but also how they prepare for them beforehand with multilayered portfolios of equity and debt. Whether it be personal assets, rotating savings groups, or relationships with informal lenders, people all over the world use thoughtful and complex approaches to accessing capital when formal financial services are inaccessible. The authors' use of financial diaries prepared by struggling families in Asia and Africa proves that millions of individuals are prepared for the risks and rewards of financial services if they were only tailored to their needs. There is so much more that financial institutions can do, and this study is a significant building block in understanding how to develop financial products for even the poorest of the poor. Thanks for such a great book, and I hope to see more work like this.
One last comment - I don't think there's a single equation in the whole book! Finally, economics without algebra... it's like heaven. Brilliant approach to analyzing seemingly-impenetrable issues I opened "Portfolios of the Poor" feeling dubious: multiple-authored works usually feel like the proverbial camel stitched together by a committee. And what's this about the world's poorest--who we all KNOW don't have anything resembling financial savvy--having "portfolios?" Within a few pages I was completely hooked, and since finishing this masterful work I can't stop pondering--and talking with friends & colleagues about--its many powerful insights.
Rather than the usual 30,000-foot opining about The Poor, the authors spent more than a year actually living in, and closely observing residents of, some of the earth's most wretched slums. Their experiences, as reported honestly and respectfully here, will profoundly affect your views of poverty--and of what we can do to help. I won't scoop the authors' ably-told tales, nor their eminently sensible recommendations. This is the first book I've read in a long, long time that has fundamentally changed my thinking on questions of international development. Read it! The Poor, Smooth Operators How the poor spend wisely | Smooth operators | The Economist
Page 82, May 16, 2009 ... Even those with very little money have a sophisticated approach to finance.
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Smooth operators
May 16th 2009
From The Economist print edition, page 82
Even those with very little money have a sophisticated approach to finance
PAYING interest on your savings will strike most people as odd. Yet some poor people in the developing world do just that. In West Africa, for example, some people pay roving susu collectors a fee amounting to a -40% annual interest rate for looking after their deposits.
And the authors of a new book, Portfolios of the Poor, about the financial lives of people who earn less than $2 a day find that this sort of "pay-to-save" model is by no means unique to Africa. They encounter a similar phenomenon in India, where a female deposit collector called Jyothi looks after small savings for people in the slums of Vijayawada, at an effective yearly interest rate of -30%.
Some of Jyothi's customers are among the 250 families in South Africa, India and Bangladesh whose financial transactions over a year were recorded to study how very poor people manage their resources. Given that these are so meagre, this might seem to be an unpromising line of inquiry. But as many of the subjects emphasised, controlling the flow of cash becomes all the more critical when income is not just low, but also unpredictable and irregular.
These features are what economists like to call "consumption smoothing"--spreading spending out in a way that ensures that what you eat one day is not determined by what you have earned that day or the day before. The subjects used a combination of loans and savings to ensure that their lives were not, literally, hostage to fortune. Hardly anyone lived utterly hand-to-mouth.
The research provides evidence of the sophistication with which poor people think about their finances. They are acutely aware, for example, of the importance of some psychological phenomena whose effects behavioural economists have only recently begun to explore. For instance, they purposefully seek out commitments to help ensure that they meet their saving goals. Many of the South African women in the study joined several monthly "savings clubs" in spite of having bank accounts. They found that the extra discipline the clubs provided was valuable in itself, because it compelled them to save no matter what.
Some went further. The mother of a Bangladeshi man who found himself unable to stick to his monthly saving goal found she could make him save more by taking out a loan from a microfinance company. The shared obligation of having to pay the regular loan instalments meant he abandoned his spendthrift ways.
The unbanked do not have access to such luxuries as standing orders, which richer people use to overcome the temptation to spend whatever they earn. And they are forced to pay for things that are free for most--which enables women like Jyothi to earn a crust by offering a safe store for small savings. But with some ingenuity, they use unorthodox financial instruments to create a more stable life than their erratic incomes would otherwise allow.
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