On June 8-9, MicroSave and Financial Access Initiative (FAI) hosted the virtual conference: Reimagining Microfinance Around the World: Implementing Lessons from Portfolios of the Poor. The discussion centered on how to turn lessons from the financial diaries into real, on-the-ground solutions for improving the lives of the poor. Co-authors Daryl Collins, Jonathan Morduch, Stuart Rutherford and Orlanda Ruthven, and MicroSave’s Graham Wright, worked around the clock to field questions from a diverse mix of industry experts.The conference attracted hundreds of participants who raised important questions based on the findings from the book. Microfinance Focus published three articles that feature excerpts from the discussion. Links to these articles can be found below. A series of Briefing Notes and videos created in preparation for the event can also be accessed below.
Excerpts from Portfolios of the Poor June 2010 Virtual Conference
Series 1: How Poor People Manage their Money
Series 2: Role of MFIs in Managing Poor Peoples’ Money
Series 3: Does Interest Rate Matter in Microfinance?
Portfolios of the Poor Briefing Notes
Briefing Note 1: The Triple-Whammy of Poverty
This Briefing Note explores the pattern of “triple-whammy” poverty trap and examines how households manage and what can be done to help households cope with their most basic, daily challenges. It further explores this phenomenon through the experiences of three dairy households. This note dwells into three distinct problems which poor face – small income, irregular and unpredictable cash flows and unreliable and not suited exiting financial instruments to match the irregular cash flow pattern. The document traces experiences based on financial diaries which captures each and every financial transaction/behaviour of an individual poor over a period of time. The research makes it evident that having alternative sources of reliable, convenient, and reasonably priced financial tools are better suited to the unpredictable cash flows of poor.
Briefing Note 2: Borrowing to Save
This Briefing Note highlights the “borrowing while saving" financial practice observed among diary households, and documented in the book Portfolios of the Poor: How the world’s poor live on $2 a day. It describes factors like simultaneous borrowing and saving, and discusses the difficulty of rebuiding savings as a possible explanation for this behavior. The note further discusses why poor households borrow when they can dis-save, and what lenders can do to provide financial instruments better matched to the irregular and unpredictable cash flow patterns of the poor.
Briefing Note 3: How do the Poor Deal with Risk
This Briefing Note offers insight into the ways poor households manage risks. Based on the financial diaries research outlined in Portfolios of the Poor: How the World’s Poor Live on $2 a Day, this brief describes the formal and informal risk management tools used by poor households in Bangladesh, India and South Africa, and examines how these tools can be improved to help the poor mitigate risk and plan for the future. Dealing with emergencies means being able to pull together adequate financing at the right moment. The diary households used credit, savings and insurance, both formal and informal, to mitigate risk. The note also discusses some of the other aspects under the new ideas for helping poor households deal with risks – partial coverage, product design and beyond insurance.
Briefing Note 4: Research Methodologies
Portfolios of the Poor offers new thinking about how the world’s poorest communities manage their financial lives. To uncover these intimate details, researchers designed a study in which they interviewed poor households twice a month over the course of a year, and recorded the details of how they lived their financial lives. These “financial diaries” encompass data from nearly 250 households in Bangladesh, India, and South Africa, and reflect a mixed-research methodology that is systematic in data collection while simultaneously captures the complexity of people’s lives.
This note explores the following research methodologies adopted during the book’s research:
• The financial diaries approach
• Interviews
• Demographics of the survey sample
• The continuum of household research: Where do the financial diaries fall?
• Lessons learnt from portfolio approach
Briefing Note 5: Creating Better Portfolios
Portfolios of the Poor: How the World’s Poor Live on $2 a Day examines the basic question of how the world’s poorest households survive on such modest incomes. The authors report on yearlong "financial diaries" of villagers and slum dwellers in Bangladesh, India, and South Africa--tracking penny by penny how households manage their money. This note explores the core financial instruments utilized by diarist households, and draws lessons from these practices to devise better borrowing and saving instruments for the poor.
Portfolios of the Poor Interview Podcasts
An Introduction to Portfolios of the Poor, by Bob Christen
Bob Christen, director of the Financial Services for the Poor initiative at Bill & Melinda Gates Foundation, offers a thoughtful introduction to Portfolios of the Poor.
Stuart Rutherford on Portfolios of the Poor: Four-Part Video Series
Co-author and SafeSave Bangladesh founder, Stuart Rutherford, begins this four-part interview series with a critical, though often overlooked, factor in the design of quality financial products for the poor: the integration of client satisfaction. Rutherford provides valuable commentary on why it is so important—for customers and banks—to consider the needs, resources, and constraints of customers, and discusses how lessons revealed in Portfolios can help MFIs narrow the gap between the financial products they offer and what clients need. In Part 2, Stuart identifies the key lessons from Portfolios and highlights misconceptions about the financial practices of poor households that its research helped to correct. Rutherford also answers questions about the diverse and complex saving methods employed by Portfolio diarists. In Part 3, Stuart outlines the three major challenges Portfolios authors continually observed among diarists: 1) extreme poverty is not only about being very poor, but about managing daily expenses with unpredictable earnings and unreliable jobs: 2) the hardships of limited earnings are compounded by emergencies to which the poor are so vulnerable, forcing already-poor households to patch together an adequate level of cash; and 3) low wages and frequent emergencies prevent households from assembling usefully large sums for bigger expenses, such as housing, marriages, and education, etc. Rutherford then delves into the types of products poor households need to accommodate their financial position and maximize their resources. Stuart dedicates Part 4 to a discussion of three MFIs that have redesigned their products to more adequately meet the three fundamental challenges poor households face. Grameen-2, SafeSave, which Rutherford founded, and BURO Bangladesh are cited as examples of MFIs that have revolutionized their models to fit the needs of poor households. Rutherford also comments on the potential of e-banking and m-banking for microfinance industry. These videos can be accessed here.
William Easterly on Portfolios of the Poor
William Easterly explains how Portfolios of the Poor gives us a more realistic look at the life of poor people and how it changes the perspective on the “consumption smoothing” concept.
Jonathan Morduch on Portfolios of the Poor: Two-Part Video Series on Reimagining Microfinance
Jonathan Morduch, co-author of Portfolios of the Poor, dedicates his video segments to a discussion on what the book tells us about reimagining microfinance. These videos can be accessed here.
Yaw Nyarko on Portfolios of the Poor: Research Methodologies
Yaw Nyarko, Professor of Economics at New York University and Director of NYU Africa House, talks about the particulars of the research for Portfolios of the Poor and how it will influence the development of new research trends.
Richard Rosenberg on Portfolios of the Poor: Three-Part Video Series
Richard Rosenberg, consultant to CGAP, highlights the biggest findings of Portfolios of the Poor in the first segment of his three-part video podcast series. In Part 2, Richard discusses the value proposition of microfinance and how this issue relates to the price of financial services. Richard concludes his discussion of the value proposition of microfinance and price in Part 3. These videos can be accessed here.
Sukhwinder Singh Arora on Portfolios of the Poor
Sukhwinder Singh Arora, co-author of two books Small Customer, Big Market: Commercial Banks in Microfinance (with Malcolm Harper) and The Poor and their Money (with Stuart Rutherford) talks about how the lessons from Portfolios of the Poor help providers design better products.
Daryl Collins on Portfolios of the Poor: Two-Part Video Series
Daryl Collins, co-author of Portfolios of the Poor and a Senior Associate at Bankable Frontier Associates, talks about implementing lessons from Portfolios of the Poor in South Africa in this two-part video series. These videos can be accessed here.
