Stuart Rutherford

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IDPM Manchester SafeSave Bangladesh
www.safesave.org
Stuart Rutherford
in praise of General Purpose Microfinance for
the poor
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If youre 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
• thats what financial services are for

Arguably, the very poor need financial services
even more intensely than the non-poor
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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

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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)

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Some comments from diarists

• India I hate having to borrow and I hate having
  to lend to others. But what can you do? You cant
  run life without borrowing. Its not possible for
  people like us.
• Bangladesh How do we keep track of all these
  transactions? Thats 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
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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 doctors
  fees for her son
• the service has helped her build up over 100 in
  a the GPS long-term savings account

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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-stocksthe next
  paid for her father-in-laws funeralwith the
  third they paid off an expensive older loannext
  they bought food-stocks againthe fifth was used
  to buy medicine for her husbandthe last paid a
  years school fees for the two boys

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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