Raising the curtain on the ‘microfinancial services era’

01.03.2000
Unlike the previous two eras, when financial services for the poor were clearly characterized by first agricultural loans, then microloans to business women, the new microfinancial services era promises a diversity of financial products, and with it confusion about how these products will benefit the poor. This article attempts to clarify the situation by defining all financial services for poor people as means of turning their savings into usefully large lump sums—sums that are then used to meet needs arising from life-cycle events and from emergencies, and from opportunities to invest in land, in productive and household assets, and in businesses. Savings can be turned into usefully large lump sums by means of three basic patterns: ‘saving up’, ‘saving down’ and ‘saving through’ and the various informal financial services employing these devices which are used by poor people worldwide are described. Good financial services for poor people are therefore ones that make it convenient to store the savings and convenient to take out the lump sums, in any range of values, over any time span, and using any or all of the three basic ‘swap’ types. The best financial services for poor people do this in an affordable and reliable (sustainable) way.