June 2010
By FAI
Understanding Price: Portfolios of the Poor, How the World’s Poor Live on $2 a Day
The financial diaries provide insight into the prices poor households paid for financial instruments, and the logic behind their financial decisions. Researchers revealed that surviving on small, irregular, and unpredictable earnings often generates financial behaviors that at first seem counter-intuitive-such as paying or borrowing to save. Through the financial diaries approach, (see the “Research Methodology” Briefing Note) researchers were forced to confront assumptions and take a fresh look at understanding the price of microfinance-paying close attention to what price means to poor households, the cost financial institutions assume in lending to the poor, and the universal tension between the impatience to meet financial demands today, and the desire to save for the future.