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

Daryl Collins , Jonathan Morduch , Stuart Rutherford , Orlanda Ruthven
4.4 out of 5 stars  See all reviews (15 customer reviews)


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Book Description

April 20, 2009

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.



Editorial Reviews

From Publishers Weekly

Veterans in economics and microfinance scrutinize the finances of the poor in India, Bangladesh and South Africa. Following their 250 subjects for a year, the researchers compile family financial diaries and report on how the poor spend money and the myriad resources that function like portfolios. A confluence of circumstances the authors term a triple whammy (low and unreliable income, irregular cash flows and financial instruments ill-suited to the needs of this population) makes saving essential, and the poor depend on savings clubs, insurance clubs, money guarders or microfinance institutions. It is often a piecemeal approach, and any emergency can have disastrous consequences. With the advent of Muhammad Yunus's Grameen Bank in Bangladesh in 1976 and Grameen II in 2001, the growing global profile of microfinance might give the population more access to funds through reliable, flexible means—but the majority must turn to family, friends, neighbors or moneylenders. While the book's methodology and conclusions are fascinating, it is a complex and technical analysis best suited for those fluent in economics and public policy. (June)
Copyright © Reed Business Information, a division of Reed Elsevier Inc. All rights reserved.

From The New Yorker

Ten years ago, the authors of this unusual study began collecting detailed yearlong “financial diaries” from households in Bangladesh, India, and South Africa, with a focus on those living on less than two dollars a day per person. They found, to their surprise, that none of the families lived hand to mouth; even the poorest relied on complex combinations of financial strategies, including joining savings clubs, buying funeral insurance, and acting as “money guards” for neighbors. The diarists did things that might seem irrational—borrowing in order to save; paying interest on savings—but that made sense given their unpredictable incomes and limited options. While the authors do offer prescriptions for how to expand those options, it’s their scrupulous attention to actual behavior that makes this book invaluable.
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Product Details

  • Hardcover: 312 pages
  • Publisher: Princeton University Press (April 20, 2009)
  • Language: English
  • ISBN-10: 0691141487
  • ISBN-13: 978-0691141480
  • Product Dimensions: 6.5 x 0.9 x 9.5 inches
  • Shipping Weight: 1.2 pounds
  • Average Customer Review: 4.4 out of 5 stars  See all reviews (15 customer reviews)
  • Amazon Best Sellers Rank: #103,713 in Books (See Top 100 in Books)

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Customer Reviews

Most Helpful Customer Reviews
37 of 37 people found the following review helpful
Format:Hardcover
I opened "Portfolios of the Poor" feeling dubious: multiple-authored works usually feel like the proverbial camel stitched together by a committee. And what's this about the world's poorest--who we all KNOW don't have anything resembling financial savvy--having "portfolios?" Within a few pages I was completely hooked, and since finishing this masterful work I can't stop pondering--and talking with friends & colleagues about--its many powerful insights.

Rather than the usual 30,000-foot opining about The Poor, the authors spent more than a year actually living in, and closely observing residents of, some of the earth's most wretched slums. Their experiences, as reported honestly and respectfully here, will profoundly affect your views of poverty--and of what we can do to help. I won't scoop the authors' ably-told tales, nor their eminently sensible recommendations. This is the first book I've read in a long, long time that has fundamentally changed my thinking on questions of international development. Read it!
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17 of 18 people found the following review helpful
5.0 out of 5 stars Thoughtful, provocative, and insightful. A must read! August 16, 2009
Format:Hardcover
Having worked in economic development for some time now, I have grown accustomed to studies concerning the use of capital by the global poor being stated in simply academic terms. Portfolios of the Poor though, brings the human element back into economics and gives a more intuitive understanding of the financial challenges that people face in their daily lives. Funerals, weddings, failed health, loss of employment, religious celebrations, purchase of a new home... all of these require significant investments and require diverse access to capital. This book not only describes how people react to those challenges, but also how they prepare for them beforehand with multilayered portfolios of equity and debt. Whether it be personal assets, rotating savings groups, or relationships with informal lenders, people all over the world use thoughtful and complex approaches to accessing capital when formal financial services are inaccessible. The authors' use of financial diaries prepared by struggling families in Asia and Africa proves that millions of individuals are prepared for the risks and rewards of financial services if they were only tailored to their needs. There is so much more that financial institutions can do, and this study is a significant building block in understanding how to develop financial products for even the poorest of the poor. Thanks for such a great book, and I hope to see more work like this.

One last comment - I don't think there's a single equation in the whole book! Finally, economics without algebra... it's like heaven.
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8 of 8 people found the following review helpful
Format:Hardcover
I have to disagree with a previous reviewer: this is a very easy to read book. I was going to say a high school student could read this, but really, with just a few exceptions, a middle school student could follow this, and that's a compliment.

I imagine the first thoughts people in the "First World" have when they hear how many people survive on $2 (or less) per day is how overwhelmingly impossible and desolate that must be. If they get past that, one of the next thoughts might be, "who's paying them that every day?" It's easy to puzzle out that the very poor do not, most likely, get that money on a regular basis, and then the question of how they survive becomes even more unfathomable.

This work goes a long way toward answering that question. After following over 200 families in Bangladesh, India and South Africa, the researchers made a number of surprising conclusions. First, contrary to what we might assume, the very poor do not live hand-to-mouth, immediately consuming all of their very small resources as soon as they arrive. They are able to pay for participation in festivals, weddings, funerals, emergencies and education, just to name a few. Second, and most importantly, the poor are able to do this through a variety of financial instruments- formal, semiformal and informal- that show a level of sophistication that most wouldn't expect.

However, as one can easily imagine, both the small total amount of income and the irregularity with which it arrives creates stressful situations when those sums have to be raised. In many cases, they are raised, but most have to make more use of loans than savings. While many of those loans are even interest-free, the financial and social anxiety they create have costs of their own, which many are eager to avoid.

The authors frequently refer to the "Triple Whammy" that affects their subjects: not only are their incomes small and infrequent, but the majority of the very poor lack access to reliable, flexible financial tools that allow them to save their small funds over a long-period of time. They also lack access to reliable loans. While some might argue against the credit-worthiness of such individuals, the argument that these financial diaries make is that the majority of them have already demonstrated a capacity to make small, frequent payments; they are worthy lending risks, but flexible arrangements must be allowed.

This is not to say that there are no tools. There are an impressive variety of savings clubs, savings schemes and credit instruments. But many are fraught with risk; for example, the treasurer of one savings club in South Africa was murdered while she was transporting half of the funds to the bank.

The authors spent some time debunking some myths about money lenders, particularly the high interest rates. In essence, their argument is that the high rates quoted at the beginning of the transaction is intended to be both a deterrent and insurance, as many such loans are difficult to fully recover. However, the authors quoted a few anecdotes where the interest was renegotiated or forgiven once at least a partial payment record had been established.

It was clear to both the authors and the readers that health costs, whether in the form of a sudden event or a long-expected death, was a huge strain on their subjects, both in terms of lost income potential and the cost of treatment. Clearly, this issue needs to be addressed.

Microfinancing as pioneered by the Grameen Bank was discussed through much of the book, even getting its own chapter toward the end. Access to a better, more reliable saving and lending instrument did not always improve the financial position of their subjects, particularly in Bangladesh. The relative inflexibility of the loan payments and loan objectives (funding a microenterprise) made it less than ideal for most of them. However, the revised "Grameen II" objectives added not only more flexibility but also a mandated savings account. Those who enrolled in the program began enjoying more financial flexibility. However, Microfinance is still not a perfect solution, as it is still linked to business and not households. The authors were optimistic that this would change.

I found this book to be informative about a subject that has been, frankly, bothering me for some time. However, I was surprised that it wasn't until the end of the book that we got any information about the authors. Now knowing that one of the authors founded a microfinance organization of his own, I am even more skeptical about the frequent mention of that category of business in this work. Stating that upfront would have made the work more transparent.

Still, this is a groundbreaking work, and the methodology used can easily be replicated to further the work in this important subject.
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Most Recent Customer Reviews
5.0 out of 5 stars One of the best pieces of literature I've read in recent years. It is...
I was amazed at how people living in some of the most extreme forms of poverty created a structured and sophisticated system to handle their meager finances.
Published 3 months ago by Helen Murray
5.0 out of 5 stars Brand New book!
The Book Portfolios of the Poor arrived in great condition and earlier than expected! This book was recommended in two of my classes this term - it will certainly be well read. Read more
Published 8 months ago by GW_grad_student
4.0 out of 5 stars Understanding the daily reality of global poverty
This book makes a major contribution to our understanding of global poverty.

Portfolios of the Poor reports the findings of a series of detailed, year-long studies of... Read more
Published 10 months ago by Mal Warwick
5.0 out of 5 stars Great book, makes you rethink your life
I have only started this book, but the insight there is into the reality of many poor people's everyday lives is convicting and causes you to rethink your life and what you take... Read more
Published 14 months ago by live.to.serve
5.0 out of 5 stars Thoughtful, insightful and best of all - it debunks many...
It is hard to imagine for those living in the developed part of the world that two fifths of people today manage to survive on two dollars a day. Read more
Published 15 months ago by Prisacaru Dan
5.0 out of 5 stars Does exactly what it should
This book walks you through case studies of many people who are, for the most part, stone broke. Yet, despite this, they cover unforeseen expenses, feed their kids, and build... Read more
Published 20 months ago by Dan Bergevin
5.0 out of 5 stars Great!
The book arrived in great condition! Thanks for your help! It came in the condition it was described, and it arrived promptly.
Published 20 months ago by Priscilla Lee
5.0 out of 5 stars Portfolios of the Poor - GREAT READ
The work done in Portfolios of the Poor has greatly impacted the way I view development, microfinance, and poverty. Read more
Published on February 16, 2011 by J. Scott
4.0 out of 5 stars The Poor Have Portfolios
The book begins with what I believe is the flawed theory that only 3% of the poor have a negative net worth so I read the book through this lens (pg 10). Read more
Published on November 2, 2010 by Debra L. McLeod
4.0 out of 5 stars Academic Look at Microfinance
This book doesn't really tell a captivating story, but for someone with an academic interest in microfinance it offers a lot of good insights on how microfinance plays out in... Read more
Published on September 12, 2010 by Robin
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