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

296 Pages·2009·1.11 MB·English
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This page intentionally left blank Copyright © 2009 by Princeton University Press Requests for permission to reproduce material from this work should be sent to Permissions, Princeton University Press Published by Princeton University Press, 41 William Street, Princeton, New Jersey 08540 In the United Kingdom: Princeton University Press, 6 Oxford Street, Woodstock, Oxfordshire OX20 1TW All Rights Reserved 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

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