Portfolios of the Poor: How the World's Poor Live on $2 a Day

296 Pages·2009·1.11 MB·English

by  Daryl Collins, Jonathan Morduch, Stuart Rutherford, Orlanda Ruthven

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Library of Congress Cataloging-in-Publication Data
Portfolios of the poor : how the world’s poor live on two dollars a day /
Daryl Collins . . . [et al.].
p. cm.
Includes bibliographical references and index.
ISBN 978-0-691-14148-0 (hardcover : alk. paper) 1. Poor.
2. Microf nance. 3. Home economics—Accounting. I. Collins, Daryl.
HC79.P6.P67 2009
339.4⬘6—dc22
2008055161
British Library Cataloging-in-Publication Data is available
T is book has been composed in Minion Typeface
Printed on acid-free paper. ∞
press.princeton.edu
Printed in the United States of America
1 3 5 7 9 10 8 6 4 2
Contents
List of Tables vii
List of Figures ix
Chapter One
T e Portfolios of the Poor 1
Chapter Two
T e Daily Grind 28
Chapter T ree
Dealing with Risk 65
Chapter Four
Building Blocks:
Creating Usefully Large Sums 95
Chapter Five
T e Price of Money 132
Chapter Six
Rethinking Microf nance:
T e Grameen II Diaries 154
Chapter Seven
Better Portfolios 174
v
C O N T E N T S
Appendix 1
T e Story behind the Portfolios 185
Appendix 2
A Selection of Portfolios 211
Acknowledgments 243
Notes 247
Bibliography 265
Index 273
vi
Tables
Table 1.1 Purchasing Power Parity Comparisons 6
Table 1.2 Hamid and Khadeja’s Closing Balance Sheet, No-
vember 2000 9
Table 2.1 Year-End Financial Asset Values and Annual Cash
Flows through Financial Instruments for Median House-
holds 33
Table 2.2 Portfolio Summary for Subir and Mumtaz over the
Research Year 34
Table 2.3 Annual Income of the Median Diary Households 38
Table 2.4 Regular versus Irregular Income Households, South
Africa 45
Table 2.5 One-on-One Interest-Free Borrowing and Lending 50
Table 3.1 Most Frequent Events Causing a Financial Emer-
gency, by Country 68
Table 3.2 Stages in Holding a Funeral, South Africa 76
Table 3.3 T embeka’s Portfolio of Funeral Coverage 81
Table 3.4 Sources and Uses of Funds for Xoliswa’s Mother’s
Funeral 83
Table 3.5 Sources and Uses of Funds for T embi’s Brother’s
Funeral 85
Table 4.1 Nomsa’s Typical Monthly Budget 99
Table 4.2 Lump Sums from a Single Instrument Spent in the
Research Year, by Country 102
vii
L I S T O F TA B L E S
Table 4.3 Types of Instruments Used to Form Lump Sums 102
Table 4.4 Primary Use of 298 Large Sums 103
Table 4.5 Primary Use of 194 Large Sums Used for Opportu-
nities 108
Table 4.6 Where Large Sums Were Formed 112
Table 6.1 Grameen II Diaries: Total Disbursed Value of Loans,
by Source 165
Table 6.2 Grameen II Diaries: Number and Disbursed Value
of Microf nance Loans, by Use Category 166
Table A1.1 Areas in Which Financial Diaries Households
Resided 191
Table A1.2 Average PPP Dollar Per Capita Daily Incomes for
Selected Diary Households 198
Table A1.3 Microf nancial Instruments, Services, and Devices 206
Table A2.1–15 Sample Portfolios: Financial Net Worth at the
Start and End of the Research Year 213
viii
Figures
Figure 2.1 Income-earning categories of f nancial diaries
households 37
Figure 2.2 Incomes of two Indian occupational groups,
aggregated monthly 39
Figure 2.3 Revenues and inventory expenses of a South Afri-
can small businesswoman 41
Figure 4.1 Cash-f ow schematic for Nomsa’s saving-up club 115
Figure 4.2 Cash-f ow schematic for Nomsa’s RoSCA 117
Figure 5.1 Monthly internal rate of return 139
Figure 5.2 Accumulating savings with bank interest rate 146
Figure 5.3 Accumulating savings with ASCA interest rate 147
Figure A1.1 Margin of error in reported cash f ows, South
Africa 209
ix