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Portfolios of the Poor

How the World’s Poor Live on $2 a Day

By Daryl Collins, Jonathan Morduch, Stuart Rutherford, Orlanda Ruthven
9-minute read
Audio available
Portfolios of the Poor: How the World’s Poor Live on $2 a Day by Daryl Collins, Jonathan Morduch, Stuart Rutherford, Orlanda Ruthven

Portfolios of the Poor (2009) details the creative financial strategies that the world’s poorest people use to get by. These blinks explain how people with no educational background whatsoever manage their finances.

  • People who want to understand the realities faced by the world’s poor
  • Those seeking productive ways to end poverty

Daryl Collins is the senior associate at Bankable Frontier Associates in Boston. She was responsible for organizing the latest version of the financial diaries in South Africa and holds both a B.Sc., and an M.Sc in Economics from the London School of Economics.

The other three authors, Jonathan Morduch, Stuart Rutherford and Orlanda Ruthven, are all experts in economics with international experience, primarily in microeconomics.

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Portfolios of the Poor

How the World’s Poor Live on $2 a Day

By Daryl Collins, Jonathan Morduch, Stuart Rutherford, Orlanda Ruthven
  • Read in 9 minutes
  • Audio & text available
  • Contains 5 key ideas
Portfolios of the Poor: How the World’s Poor Live on $2 a Day by Daryl Collins, Jonathan Morduch, Stuart Rutherford, Orlanda Ruthven
Synopsis

Portfolios of the Poor (2009) details the creative financial strategies that the world’s poorest people use to get by. These blinks explain how people with no educational background whatsoever manage their finances.

Key idea 1 of 5

Though lacking a stable income, those living in extreme poverty have strong, effective money management skills.

When we hear about people living in extreme poverty – subsisting on a meager $2 a day – it’s easy to assume that they’re leading the toughest lives out there. And this is only the first assumption we tend to make about the world’s poorest people.

We also often assume that people with little money spend any and all cash as soon as they get it. But that’s not true. People living on an average of less than $2 a day usually set aside a small amount of savings – a nest egg for covering unforeseen expenses and tiding over periods without income.

For instance, Hamid, who lives in Bangladesh, always keeps a little cash on him for emergencies, stashes enough money at home for food and also puts aside the necessary amount for making improvements to his home.

But since most of the world’s poorest people are illiterate, they keep track of and manage their finances through oral communication with their friends and families. For example, a husband might tell his wife that he’s trying to save money for their children’s school supplies, and that he’s going to take a job at a local store to earn some income and borrow the remainder from their neighbor. Now that she knows his plan, the man’s wife can remind him to stick to his commitments.

In fact, the ability to manage money in such ways is absolutely key for extremely poor people. Because their income is usually irregular, paying back loans is a real difficulty. For instance, farmers earn practically all their yearly income during two or three peak months of harvest and virtually nothing for the rest of the year. Naturally, it’s difficulty for them to stay on top of monthly payments during periods of low-income, a fact that makes good money management vital to their success.

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