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Portfolios of the poor by Daryl Collins, Jonathan Morduch, Stuart Rutherford and Orlanda Ruthven

Get the book: https://amzn.to/3OZFAGc

Nearly forty percent of humanity lives on an average of two dollars a day or less. If you've never had to survive on an income so small, it is hard to imagine. How would you put food on the table, afford a home, and educate your children? How would you handle emergencies and old age? Every day, more than a billion people around the world must answer these questions. Portfolios of the Poor is the first book to systematically explain how the poor find solutions to their everyday financial problems.

The authors conducted year-long interviews with impoverished villagers and slum dwellers in Bangladesh, India, and South Africa--records that track penny by penny how specific households manage their money. The stories of these families are often surprising and inspiring. Most poor households do not live hand to mouth, spending what they earn in a desperate bid to keep afloat. Instead, they employ financial tools, many linked to informal networks and family ties. They push money into savings for reserves, squeeze money out of creditors whenever possible, run sophisticated savings clubs, and use microfinancing wherever available. Their experiences reveal new methods to fight poverty and ways to envision the next generation of banks for the "bottom billion."Indispensable for those in development studies, economics, and microfinance, Portfolios of the Poor will appeal to anyone interested in knowing more about poverty and what can be done about it.

Here are some key lessons from Portfolios of the Poor: How the World’s Poor Live on $2 a Day by Daryl Collins, Jonathan Morduch, Stuart Rutherford, and Orlanda Ruthven:

* The Poor Have Complex Financial Lives: The poor are not as financially illiterate as often assumed. They manage complex portfolios of income, savings, and credit, even if they have low or irregular incomes.

* Informal Financial Systems Are Crucial: Many poor people rely heavily on informal savings groups, rotating credit associations, and family networks to manage their finances.

* The Need for Flexibility in Financial Services: Financial services need to be flexible to meet the needs of the poor, such as providing access to credit that can be repaid in small, manageable installments.

* Income Volatility Is a Major Challenge: Income volatility—due to factors like seasonal work or unpredictable events—is a key challenge for the poor, and they often manage this by diversifying their income sources and savings.

* Savings Are Vital for Resilience: Even though poor people may have very little to save, savings are essential for managing risks and emergencies. They often use informal mechanisms, like savings clubs or keeping money with trusted people, to build financial security.

* Access to Credit Can Improve Livelihoods: Access to affordable and flexible credit can help the poor improve their living standards, especially when they can use it for investment in productive activities or to smooth over income fluctuations.

* Financial Inclusion Can Help the Poor Break the Cycle of Poverty: Properly designed financial products and services can help the poor build resilience, increase income-generating activities, and escape from poverty over time.