Book Review, “Portfolios of the Poor: How the World’s Poor Live on $2 a Day” -- Habitat for Humanity Int'l 1
Book Review, “Portfolios of the Poor: How the World’s Poor Live on $2 a Day”
By Daryl Collins, Jonathan Morduch, Stuart Rutherford and Orlanda Ruthven (Princeton University Press, $29.95).
By Patrick Kelley
The World Bank estimates that 2.5 billion people—a full 40 percent of the people living on the planet—live on about US$2 a day or less. How do they manage to afford food, education, health expenses, shelter and even personal enrichment?
“Portolios of the Poor” provides a view of how low-income people manage their money and find surprisingly sophisticated ways of coping. Researchers spent a year visiting families every two weeks, keeping track of the financial diaries of life on less than $2 a day.
An example in their book is that of Hamid and Khadeja in Bangladesh. From Hamid’s rickshaw work and Khadeja’s sewing, they earn about $70 a month.
“You wouldn't expect them to have much of a financial life, but their balance sheet tells another story,” the authors write. “In savings, the couple keeps $2 at home for daily shortfalls and $30 with Hamid’s parents for safekeeping. They have lent $40 to relatives and invested $76 in life insurance. They have also borrowed $153 from a microfinance institution and owe $24, interest-free, to family, friends and an employer. Finally, Khadeja serves as a ‘moneyguard’ for her neighbors, holding $20 for women who are stashing cash beyond their husbands’ reach. ‘I don’t really like having to deal with other people over money, but if you’re poor, there’s no alternative,’ Khadeja said. ‘We have to do it to survive.’ ”
The book illustrates that one of the most difficult aspects of poverty is not just the lack of income, but its irregularity and variability. Income’s ebbs and flows, combined with the lack of access to formal financial instruments, create a need for some unusual coping mechanisms.
Community-led rotating savings and credit cooperatives, burial societies, neighborhood moneyguards, microfinance loans and systems of extended family borrowing may seem strange to rich world citizens, but “Portfolios of the Poor” shows how they make sense.
The book bridges what is sometimes a divide between rigorous academic analysis and real human insights.
“The intensity of getting to know the characters in the financial diaries informed our perspective on financial behavior as much as our scrutiny of the data we collected,” the authors write. “We and our field team got to know not only which respondents were using what financial devices, but also gained a deeper and more personal understanding of who these people were.”
It’s an informative read for the Habitat for Humanity community for several reasons. First, shelter needs play a prominent role in the lives of those profiled. In fact, housing and property expenditures were either the first or second most common event the poor had to prepare and plan for.
Second, as Habitat strives to develop demand-driven programs, understanding the nuances of the tradeoffs, perceptions of value, price points and coping mechanisms of the poor is critical. “Portfolios of the Poor” provides richly insightful intelligence for the market Habitat wants to serve.
Finally, it’s important to note that there is a Habitat connection in its authorship. Daryl Collins works for Bankable Frontiers, a Boston consulting firm that helps governments and private organizations research and develop innovative ways to create more inclusive economies and fight poverty. Bankable Frontiers led the 2009 study “Capitalizing housing finance for the poor” for Habitat for Humanity, which prompted Habitat’s board of directors to pass a resolution creating the Habitat for Humanity MicroBuild Fund.
Patrick Kelley is director of international housing finance at Habitat for Humanity International.
For an interview with the authors of “Portfolios of the Poor,” visit NPR’s Planet: www.npr.org/blogs/globalpoolofmoney/images/2009/07/podcast07.08.09.mp3