FacebookTwitterGoogle+RedditEmail

Diaries of the Distressed

Good news.  Great news.  Many of the world’s poor employ sophisticated ways of managing their money, or—as the authors of this important study state—“…living on under two dollars a day requires unrelenting vigilance in cash management—strategies to cope with the irregularities of income….  Being poor does not disqualify you from being inventive in your finances.”

In 2005, 2.5 billion people around the world lived on $2.00 or less a day; of that number, 1.1 billion on $1.00 or less.  Many of these people have learned to practice the tradition of musti chaul: “of keeping back one fistful of dry rice each time a meal was cooked, to hold against lean times, to have ready when a beggar called, or to donate to the mosque or temple when called to do so.”  As with rice, money is held back, reserved for similar emergencies.

In Portfolios of the Poor, Daryl Collins and his colleagues studied nearly 250 households, had them keep elaborate financial diaries of their lives in slums and villages in South Africa, India, and Bangladesh for a period of twelve months.  Every penny was tracked.  Rarely was everything that was earned spent but, rather, something was retained for emergencies (sickness, death) or the anticipated higher expenses (weddings, school fees, etc). No one in the study lived hand to mouth, though from household to household living conditions varied significantly—often depending on the number of children and the number of workers within the family.

The interpolated case studies are revealing, certain to question some of our stereotypes of the poor.  In Africa, where funerals can be particularly expensive (and where mortality rates have increased substantially during the past two decades because of AIDS), actual costs are often staggering.  “One broad study of funerals in South Africa showed that, for households with incomes in the range of $155-$300 a month, funerals typically cost in the order of $1500.  The South African financial diaries suggest that households need to spend about seven months’ income on a single funeral.  Such costs cannot be met out of cash flow, and if they are to be met at all a financial instrument, or combination of financial instruments, must be brought into play.”

Informal financial groups (friends, relatives, savings clubs, for example) were often combined with insurance policies (sometimes more than one) set up expressly for funeral expenses.  “Large sums are cobbled together from smaller ones: loans are taken, gifts received, savings depleted,” yet this piecemeal approach typically worked for the households studied in South Africa.  Procedures were different in Bangladesh and in India, where microfinance organizations were available, at least at the time of the study, though these financial organizations were often supplemented by informal ones.  In short, multiple strategies appear to be the norm. Interest rates are often quite high by Western standards but Collins and his colleagues demonstrate that often the high interest rates act as an incentive to pay loans off quickly.

One fascinating example from India describes a savings plan set up by a woman of the slums named Jyothi who collected “small deposits from her customers, most of them housewives.  She gave them a crude passbook, just a card divided into 220 cells made up of 20 columns and 11 rows, so that savers could keep track of their progress.  When all 220 cells were ticked off, Jyothi returned the savings to the value of 200 of the 220 cells, holding back the remaining 20 cells’ worth of her fee for the service.  Thus someone depositing a total of $44 with her, at 20 cents a day, would get back $40.”

Call this negative interest rates, if you want.  “Put this fact to the savers and they will tell you to forget your fancy calculations: the fact is that they needed their $40 to ensure that they could pay school fees to keep their children in class for another year.  With husbands earning irregularly, the only sure way to build up this sum was to take pennies from the housekeeping each day and hand it over to Jyothi.  It costs them only $4 to form the $40, and Jyothi did all the work.  Taken within this context, this is a reasonable price to pay to build badly needed saving.”

Significant space is devoted to recording the details of the Grameen Bank of Bangladesh’s success with microfinance, awarded (along with its founder Muhammad Yunus) the Nobel Peace Prize in 2006.  Currently this bank and others in Bangladesh service twenty million customers.  The authors of the study praise the evolution of Grameen’s policies, describing them as “organized finance for the poor,” still evolving at a rapid pace.

As a layman, not an economist, I found Portfolios of the Poor fascinating.  It certainly exposed some of my own stereotypes of the world’s poor, but I do have two reservations.  First, two of the countries under study (India and Bangladesh) share a number of historical and geographical similarities.  I wonder if another Asian country, say Cambodia, might have revealed something else.  And, as far as African goes, South Africa is in many ways atypical of most countries south of the Sahara.  If Zambia or even Nigeria had been used instead of South Africa, would the conclusions about money management have been the same?  Thus, in part I wonder if other countries had been chosen would the “encouraging” conclusions have been the same.

Second, what about those at the very bottom who certainly live from hand-to-month?  The day I finished reading Portfolios of the Poor, I read a lengthy article in The Washington Post (“Pakistan’s Kiln Workers Bricked in by Debt,” by Pamela Constable, 3 July 2009), which certainly presents a more horrific picture of people at the bottom.  From what I’ve observed in my travels, too many people are stuck at the very bottom.

Still, it’s difficult not to be impressed by Collins, Morduch, Rutherford, and Ruthven and their important work.

CHARLES R. LARSON is Professor of Literature at American University, in Washington, D.C.

 

 

 

 

 

 

 

 

 

 

 

 

 

More articles by:

Charles R. Larson is Emeritus Professor of Literature at American University, in Washington, D.C. Email = clarson@american.edu. Twitter @LarsonChuck.

Weekend Edition
April 20, 2018
Friday - Sunday
Paul Street
Ruling Class Operatives Say the Darndest Things: On Devils Known and Not
Conn Hallinan
The Great Game Comes to Syria
Jeffrey St. Clair
Roaming Charges: Mother of War
Andrew Levine
“How Come?” Questions
Doug Noble
A Tale of Two Atrocities: Douma and Gaza
Kenneth Surin
The Blight of Ukania
Howard Lisnoff
How James Comey Became the Strange New Hero of the Liberals
William Blum
Anti-Empire Report: Unseen Persons
Lawrence Davidson
Missiles Over Damascus
Patrick Cockburn
The Plight of the Yazidi of Afrin
Pete Dolack
Fooled Again? Trump Trade Policy Elevates Corporate Power
Stan Cox
For Climate Mobilization, Look to 1960s Vietnam Before Turning to 1940s America
William Hawes
Global Weirding
Dan Glazebrook
World War is Still in the Cards
Nick Pemberton
In Defense of Cardi B: Beyond Bourgeois PC Culture
Ishmael Reed
Hollywood’s Last Days?
Peter Certo
There Was Nothing Humanitarian About Our Strikes on Syria
Dean Baker
China’s “Currency Devaluation Game”
Ann Garrison
Why Don’t We All Vote to Commit International Crimes?
LEJ Rachell
The Baddest Black Power Artist You Never Heard Of
Lawrence Ware
All Hell Broke Out in Oklahoma
Franklin Lamb
Tehran’s Syria: Lebanon Colonization Project is Collapsing
Donny Swanson
Janus v. AFSCME: What’s It All About?
Will Podmore
Brexit and the Windrush Britons
Brian Saady
Boehner’s Marijuana Lobbying is Symptomatic of Special-Interest Problem
Julian Vigo
Google’s Delisting and Censorship of Information
Patrick Walker
Political Dynamite: Poor People’s Campaign and the Movement for a People’s Party
Fred Gardner
Medical Board to MDs: Emphasize Dangers of Marijuana
Rob Seimetz
We Must Stand In Solidarity With Eric Reid
Missy Comley Beattie
Remembering Barbara Bush
Wim Laven
Teaching Peace in a Time of Hate
Thomas Knapp
Freedom is Winning in the Encryption Arms Race
Mir Alikhan
There Won’t be Peace in Afghanistan Until There’s Peace in Kashmir
Robert Koehler
Playing War in Syria
Tamara Pearson
US Shootings: Gun Industry Killing More People Overseas
John Feffer
Trump’s Trade War is About Trump Not China
Morris Pearl
Why the Census Shouldn’t Ask About Citizenship
Ralph Nader
Bill Curry on the Move against Public Corruption
Josh Hoxie
Five Tax Myths Debunked
Leslie Mullin
Democratic Space in Adverse Times: Milestone at Haiti’s University of the Aristide Foundation
Louis Proyect
Syria and Neo-McCarthyism
Dean Baker
Finance 202 Meets Economics 101
Abel Cohen
Forget Gun Control, Try Bullet Control
Robert Fantina
“Damascus Time:” An Iranian Movie
David Yearsley
Bach and Taxes
FacebookTwitterGoogle+RedditEmail