Only poor, not unsavvy

Feizal's ten-member family lives on a household monthly income of $36, largely comprising his earnings selling aluminum pots and supplemented by his son's earnings as a tailor's apprentice. His wife and daughters roll bidis (cheap cigarettes) to sell. Although their income is low, the family stocked away significant savings in preparation for one daughter's wedding.

When Feizal fractured his thigh bone, the family was suddenly without its main breadwinner

Have you ever wondered how, in these times of galloping inflation, your office boy and household maid manage their day-to-day expenses on a meagre salary? Food, clothes, housing, primary education for children, transportation, etc.: while the expense heads keep growing and the cost incurred on each keeps multiplying, earnings often fail to keep pace. Which makes one ponder: how does 40 per cent of the world's population manage to live on merely $2 a day?

This is the larger question that the authors of this book attempt to answer through their micro-level studies and observations. Their findings will come as a surprise to those who condescendingly believe that the poor are unsophisticated in financial matters. “Poor households actively employ financial tools not despite being poor but because they are poor,” they say.

With real-life examples from different countries - Bangladesh, India and South Africa - the authors have put together a rich and detailed narrative of the financial products and money-management techniques employed by the poor to cope with the perpetual shortage of money. “It was, surprisingly, the tools of corporate finance - balance sheet and cash flow statement - that offered the structure with which we could begin to understand what it takes, day by day, for the poor households to live on so little,” they say. The book thus busts the myth that the poor remain poor because they cannot manage their money smartly. More fundamental, or rather structural, reasons are at play because of which they are unable to rid themselves of the yoke of poverty. Through the lives of people like Hamid and Khadeja of Bangladesh, the authors demonstrate that for the poor money management is a fundamental, well-understood part of everyday life. For them the cost of an error can be dire.

The book also focuses the spotlight on the abysmal quality of financial products available to the poor. “There is a fortune at the bottom of the pyramid,” said C.K. Prahlad, the management guru who passed away recently. Multi-national corporations, especially those in the FMCG sector, such as P&G and Unilever were quick to embrace this concept. Single-serve or sachets that can be bought even by the poor are one example of the implementation of this concept. Alas, the financial services industry remains a laggard in reaching out to the poor. Except for a few notable examples such as Grameen Bank of Bangladesh, and the work being done by a few micro-finance institutions, by and large the poor remain under-banked and under-served.

This is a book that deserves to be read and assimilated. Not only those in the world of microfinance and social service, head honchos at top financial-sector firms should also read it. It could awaken them to a new area of opportunity - perhaps the last virgin market - that is waiting to be tapped.