Recently I came across an ING Vysya advertisement poster that coloured almost the entire world in its Saffron, to denote all the various places it extended its services to. It claimed to be the 4th largest service provider. What struck me most though, were the pockets of white that denoted – no service, mainly in the less developed economies.
In Today’s globalized world, all world leaders and public opinion rally around with one common cry – “Make Poverty History”. The topic on the streets these days is how to address poverty through equitable trade, debt relief and increased aid flow. These pictures can be crucial for dealing with poverty in the long run but in reality for the 3 billion people living on less than Rs 100 a day, access to even the basic financial services can be a critical ingredient in alleviating poverty.
Most people in the developing world do not have access to formal financial services. The lack of these services prevent the poor and low income people from making everyday decisions, like How to pay the children’s school fee’s ? or How to repair the damaged house? Decisions that most people take for granted. In the book “The Poor and their Money” needs such as Lifecycle needs (weddings, funerals and education), Personal Emergencies (injury and unemployment), Disasters (floods and droughts), and Investment Opportunities (business expansion, purchase of land) are cited as reasons as to why the poor demand money by author, Stuart Rutherford.
Poor people usually address their needs of financial services through a variety of financial relationships, mostly informal in nature. Credit is available from informal money lenders, but usually at very high rates of interest. Savings services are available through a variety of informal sources like Savings Clubs, where everyone contributes a small amount of cash every day, week, or month and is successively awarded the pot on rotational basis as per need. Another such source is informal Rotating Clubs...