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