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

Daryl Collins

Book cover

A usefully different perspective on the global economy. Morduch (a professor at NYU Wagner) and his co-authors structured the book around a series of financial journals kept by poor households in Bangladesh, India, and South Africa. The main takeaway is that the world’s poor also tend to be heavy users of (mostly informal) financial instruments by necessity because their incomes are also unpredictable. It was interesting to read the authors’ description of how it took their survey team several visits to get the full picture of any family’s finances, because there were so many things that people took for granted to the extent that they forgot to mention them, or that weren’t communicated well because the researchers didn’t understand the practices.

The book complicates the traditional picture of microfinance as simply a way for small entrepreneurs to acquire assets to build businesses, showing the many other legitimate needs the poor have for financial instruments. It provides a rich variety of qualitative data and narrative description without which the hard data would be fairly lifeless. Perhaps most interesting to me as an “economist” was the discussion of how “saving” and “borrowing” are often not at all clearly distinguishable–as indeed would be the case in some frictionless models but which is not the case in familiar developed settings.

I think the authors’ main message was that there is still plenty that “formal finance” could do for poor people, which I don’t doubt is true, but I came away with the feeling that we could learn something from the traditional and informal practices described in the diaries.

My Goodreads rating: 4 stars