Portfolios of the Poor: How the World's Poor Live on $2 a Day (Princeton University Press, 2009) tackles the fundamental question of how the poor make ends meet. Over 250 families in Bangladesh, India, and South Africa participated in this unprecedented study of the financial practices of the world's poor.
These households were interviewed every two weeks over the course of a year, reporting on their most minute financial transactions. This book shows that many poor people have surprisingly sophisticated financial lives, saving and borrowing with an eye to the future and creating complex "financial portfolios" of formal and informal tools.
Indispensable for those in development studies, economics, and microfinance, Portfolios of the Poor will appeal to anyone interested in knowing more about poverty and what can be done about it.
The book has seven chapters, along with some very interesting appendices detailing particular case-studies. Chapter 1 outlines the basic premise of the book and is very thought-provoking. As pointed out by the authors, figures outlining the amount of people living on average incomes of a dollar or two per day mask the fact that, for many of these people, there are days when they make money and days when they dont, so ensuring that they are able to smooth consumption through periods of no income is a critical task, not to mention saving for basic durables or cultural neccesities like funerals. I am tempted to paste great wads of text from the chapter up here but better to go and read it. Chapter 2 "The Daily Grind" examines income insecurity and the use of basic credit mechanisms to smooth consumption. Chapter 3 "Dealing with Risk" examines basic insurance and assurance mechanisms used by poor people. Chapter 4 "Building Blocks" examines savings among the poor. Chapter 5 "The Price of Money" examines the cost of various money mechanisms used by poor people. Chapter 6 "Rethinking Microfinance" examines microfinance mechanisms. Chapter 7 "Better Portfolios" outlines some ideas for improving the lives of poor people through better access to reliable financial instruments.
I haven't followed the literature on evaluating microfinance closely enough to assess the latter chapters but I found the bulk of this book very mind-opening and an excellent window into the lives of people on economic knife-edges going about the business of everyday life. Highly recommended book. The first chapter is available for free on their website and really worth reading.