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What YAO is reading: Portfolios of the Poor

By Opportunity International

Last night, at Noble Tree cafe in Lincoln Park, YAO-Chicago held a book discussion for Portfolios of the Poor: How the World’s Poor Live on $2 a Day.

If you missed it, never fear. There will be more book discussions in YAO‘s future. In fact, we may have a followup to the discussion of Portfolios, a book so seminal that at the Chicago Microfinance Conference in May, Tim Ogden, editor-in-chief of Philanthropy Action, insisted, “If you’re serious about the microfinance industry, you must read this book.”

Here are some key points from last night’s discussion:

1. The triple whammy of the poor’s small and irregular incomes, the risks they face,  and their lack of financial tools prevent them from making the most of the assets they have. This point illustrates why Opportunity offers loan, savings and insurance products as part of our core strategy.

Authors Daryl Collins, Jonathan Morduch, Stuart Rutherford and Orlanda Ruthven collaborated on "Portfolios."

Authors Daryl Collins, Jonathan Morduch, Stuart Rutherford and Orlanda Ruthven collaborated on "Portfolios."

2. The $2 a day earned by people in poverty is just an average. Some days it may be less, and it may be earned from a patchwork of formal and informal sources. Part of being poor is being stressed about your vulnerability and the volatility of daily life. So if daily life can become more stable, allowing people to plan ahead, that can add to emotional, physical and mental health.

3. The closeness of the community is integral to the survival of people living in poverty. Neighbors store money at each other’s houses for safe keeping and exchange scarce supplies of food with housemates. The stability and security of every family living in poverty is inextricably linked to that of their friends, family and neighbors and so the level of trust among them must be high. Still, a neighbor’s secret hiding place for money in their house is rarely as secure as a formal bank, and that’s where microfinance institutions with savings products can help.

4. Critics of the microfinance industry sometimes lament the loans’ high interest rates. Portfolios approaches the issues of interest rates and cost-of-borrowing from a new point of view, explaining why it often makes sense for people to take out a 30% per month loan from a moneylender or microfinance institution.

These were just a few of the points generated by reading the authors‘ case studies. To learn more, read Portfolios and also listen to this great interview on NPR. Once you’ve read it, host your own book discussion to share what you read with family and friends.

Join our Facebook group to learn about future events and to be a part of YAO’s next book discussion.

Have you read Portfolios of the Poor? Share your comments with us in the space below.

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