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| Title | The poor and their money |
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| Author | Rutherford, S. |
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| Content Language | English (en) |
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| Document Type | Book |
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| Date Of Publication | 2001 |
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| Description | This book illustrates the many ways by which poor people in developing countries manage their money, from keeping notes under floorboards and using moneylenders and savings collectors to devising and running sophisticated savings, loans and insurance clubs. All these devices are, essentially, ways to turn small savings into large enough lump sums. The author emphasises the pivotal role of savings in the life of the poor, contradicting the misconception that they are too poor to save. The book describes the recent attempts of pro-poor banks and microfinance institutions to study how the poor manage their own money in order to that they may design better financial services. Based on twenty-five years of experience, Rutherford's work is grounded in the real lives of people in Asia, Africa, and Latin America. "Poor people can save and want to save, and when they do not save it is because of lack of opportunity rather than lack of capacity. During their lives there are many occasions when they need sums of cash greater than they have to hand, and the only reliable way of getting hold of such sums is by finding some way to build them from their savings. They need these lump sums to meet lifecycle needs, to cope with emergencies, and to grasp opportunities to acquire assets or develop businesses. The job of financial services for the poor, then, is to provide them with mechanisms to turn savings into lump sums for a wide variety of uses (and not just to run microenterprises). Good financial services for the poor are those that do this job in the safest, most convenient, most flexible and most affordable way. The poor seek to turn their savings into lump sums by finding reliable deposit takers, by seeking advances against future savings (loans), or by setting up devices like savings clubs and ROSCAs. A study of these traditional methods reveals the importance of the frequency and regularity of deposits, of the time-scale over which the deposit/lump-sum swap is made, and of the relative merits of systems that offer just one kind of swap as against those that offer multiple swap types. It also shows how interest rates have been used to manage the risks faced by savings club members. Some, but not all, of these lessons have been learned by the two new sets of players that have emerged recently to form the new 'microfinance industry'. There are 'promoters' - organisations that seek to help the poor set up financial services devices owned by themselves or their communities - and 'providers' - new financial intermediaries which sell financial products to the poor. Providers, it is found, are better able to reach large numbers of poor people with innovative products that build on the experience of the informal sector. To develop good financial services for the poor we need products that suit the poors’ capacity to save and their needs for lump sums, and product delivery systems that are convenient for the poor. The essay ends by discussing how the process of establishing such products and institutions can be accelerated. The essay is not an academic paper. It is aimed at microfinance practitioners and their backers, and is intended to stimulate them to invent and test financial products for the poor and to develop suitable institutions to deliver the products." (Rutherford, 1999) |
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| Publisher | Oxford University Press (en); Colmena Milenaria (es) |
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| Number of Pages | 136 pp. |
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| Order Online | http://www.oup.co.uk/bookshop/ |
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| ISBN | 019-565790-X |
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| Series ID | 200107 |
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| Keywords | FINANCIAL SERVICES, MONEY, SAVINGS, LOANS, MICROFINANCE |
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original paper written in 1999 (EN)
