Transcript Document
in praise of General Purpose Microfinance
for the poor
IDPM Manchester & SafeSave Bangladesh
www.safesave.org
Stuart Rutherford
If you’re very poor…
your income is small, and probably irregular and
unreliable as well
you often need to spend money at times when you
have little of it to hand
At such times you can:
go without
sell hard-to-replace assets
or:
draw on past income or future income through
savings or loans
…that’s what financial services are for
Arguably, the very poor need financial
services even more intensely
than the non-poor
Financial diaries
fortnightly interviews
with selected poor
households for at least
a year, to collect data
and commentary on
their transactions,
especially their
financial transactions
diaries completed for
300 households in
Bangladesh, India and
South Africa: work in
Malawi is about to begin
Financial diaries: some key findings
poor households – even the poorest - are usually active
money managers, running portfolios of transactions and
relationships
most of their transactions take place in the informal
market (even where, as in Bangladesh, MFIs are common)
they seek to save as well as to borrow, although
opportunities to save are few: moneyguards are used for
modest sums, and clubs like ASCAs and ROSCAs are used to
build larger sums
loans are the workhorses of poor-owned portfolios: loans
usually have to do the work that specialist instruments do in
rich portfolios: insurance, building assets for old age, dealing
with emergencies and large anticipated expenditures (loans
for microenterprises are important for a minority of
households)
Some comments from diarists
India: I hate having to borrow and I hate having to
lend to others. But what can you do? You can’t run life
without borrowing. It’s not possible for people like us.
Bangladesh: How do we keep track of all these
transactions? That’s easy. This stuff burns itself into
your memory. It keeps you awake at night.
South Africa: I would do anything to avoid failing to
pay into my three stokvels* each week. I would die of
shame. I might as well die – how would I survive
without them?
* A stokvel is a kind of ASCA, used to build lump sums for consumption use
and to set aside cash for funerals
Lipi: found that the open passbook savings account
allowed her to manage day-to-day spending
Lipi saved a little every week into her
Grameen passbook savings
and withdrew regularly to meet a wide
range of everyday needs:
food shortfalls; school fees; short-term
loans to others; making her own Grameen
loan repayments and GPS deposits; helping
to buy gold earrings; buying bamboo to
make mats for sale; doctor’s fees for her
son
the service has helped her build up over
$100 in a the GPS long-term savings
account
Mahenoor: used her Grameen loans to stabilise her
household rather than start or run a business
We watched as Mahenoor took 6
loans or loan ‘top-ups’ from Grameen
she spent the first on food-stocks;
the next paid for her father-in-law’s
funeral;
with the third they paid off an
expensive older loan;
next they bought food-stocks again;
the fifth was used to buy medicine for
her husband;
the last paid a year’s school fees for
the two boys
References
• for the research into the financial
behaviour of poor people see
www.financialdiaries.com
• for Grameen II: see their website
www.grameen-info.org/ and look for the
MicroSave series of ‘Grameen II Briefing
Notes’ also available on the MicroSave
website www.microsave.org