Low Income Lives

Each month,  SAJIDA foundation, an NGO in Bangladesh receives loan repayments from almost 10,000 clients across five of their branches using mobile money.  These repayments record roughly 25,000 transactions totaling BDT  50  million  (around  USD 600,000). 

The use of credit is an essential part of how low-income households manage to smooth their consumption in the face of “double-whammy” combinations of income and expenditure shocks. The big push for microcredit in the past decade has led to an abundance of microfinance providers and other providers that offer standardized products.

This is the third in a series of short articles about the findings of a daily ‘financial diary’ research project. A description of the project can be found on its website.

In the first edition of MicroSave’s ‘Low-Income Lives’, Stuart Rutherford looks at education, using data from the Hrishipara Daily Financial Diaries project which records the flow of money from households in Bangladesh.  

In this edition of MicroSave’s ‘Low Income Lives’ series, Stuart Rutherford uses data from the Hrishipara Daily Financial Diaries to study how poor people in Bangladesh buy food.

Author draws on data collected in three low-income settlements to outline how much residents pay for water and sanitation (WatSan) services in Dhaka, Bangladesh.

In the words of NABARD, “internal savings mobilized by its members is the core of the SHG”. Banks size their loans to SHGs as a multiple of the savings accumulated. Strangely though, it is not routine for banks to verify SHG balance sheets before lending. Few SHGs try to balance their books, and even fewer have provisions for audits. In the SHG-bank linkage model, the size of bank loans is determined by the size of the SHG corpus, more than by any other single factor. As a result, SHGs face very strong systemic incentives to neglect errors that overstate their collective savings or understate losses.

In view of the highly risky nature of saving in the informal sector, it is probably necessary to think more about helping clients understand the relative risk of saving in these semi-formal institutions. It should also be noted that the evidence from this study suggests that poor people do value some form of external accountability.

There are no magic formulas for designing appropriate savings products for poor people: it requires market research and careful, systematic product development. But the rewards for the Microfinance Institutions that undertake these exercises in terms of profits and client loyalty can be remarkable, and well worth the investment.

The research undertaken for Financial Sector Deepening (FSD) Kenya over the last six years demonstrates how Kenyans want their money to help them live well.  

So is it just because people do not have access to formal services that these social networks are important or are there dimensions of this borrowing that have an intrinsic value?

This note discusses the utility of Microfinance for Water and Sanitation and the opportunities and challenges for Microfinance Institutions.

Also known as intelligent or multi-functional water meters, smart meters can measure water levels, leakages, and water quality.

From July 2016 to August 2017 Microfinance Opportunities (MFO) conducted the Garment Worker Diaries project in three countries—Bangladesh, Cambodia, and India. This blog highlights what MFO found through its research.