ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Myths about the Poor and Money

The Poor and Their Money by Stuart Rutherford; Oxford University Press, New Delhi, 2000; Rs 195, pp xii + 121.

Encouraged by the Department of International Development (UK), microfinance is used as an instrument to bring real benefits to the poor, in sub-Saharan Africa and south Asia. The present book by Stuart Rutherford, a microfinance practitioner, is not about evaluation of microfinance programmes but about a subject not so well articulated, namely, the institutional setting for saving in microfinance framework and the manner in which such savings are managed. Rutherford has managed to provide a refreshing approach in succinct language and to demolish the myths surrounding the process of savings.

For those of us in India who have gone through the literature on rural debt, and unorganised money (or rather, financial) markets, and who are familiar with the attempts of the state to effectively regulate moneylending activities, it may not come as a big surprise that savings could be generated even among the poor. Nor will it be a huge surprise for those who are aware of the rationale of the cooperative credit movement and the emergence of a number of non-bank financial intermediaries (NBFIs) in the 20th century. Yet, under the influence of formal development economics as taught in the educational institutions, myths have spread that the economic classes that save are typically the entrepreneurs (Arthur Lewis-type models), and not the labourers. Rutherford shows that this is not valid. In fact, there are two, perhaps three myths that surround saving generation. First, the poor cannot save or at least do not save. Secondly, the savings of the poor cannot be mobilised by any institutional mechanism or by granting loans in advance. Finally, savings of the poor, if any, can hardly be mobilised, except perhaps through informal markets.

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