A Life of Unnecessary Exclusion
The often referenced Portfolios of the Poor – How the World’s Poor Lives on $2 A Day illustrates the impact of financial exclusion by detailing the complex financial lives of the world’s poor. The book shows that despite a lack of access to formal financial systems, people living in poverty not only find ways to save, they create complex systems of financial management in order to make ends meet.
One of the most powerful stories in Portfolios of the Poor is that of Pumza. She lives in Cape Town, South Africa and manages the incredibly irregular flow of her income with some innovative methods.
Pumza is a sheep intestine vendor. With four children to support and a house to finance, Pumza buys fresh intestines every day, cooks them on a fire outside her home, and sells them to those passing by. How much does she make? On a good day, she makes $15 and, on a slow day, $6.
In addition to this income, Pumza receives a government child support subsidy. This brings her income to a total of $120 a month, which must cover school fees for her children, healthcare payments, and the cost to purchase fresh intestines each day.
Business profits can fluctuate daily, making regular expenses difficult to meet. Pumza is innovative with her money management and uses a number of supplementary sources to cover cash flow disruptions. When business is slow, Pumza uses a money lender to cover the difference in income. However, the money lender charges no less than 30 percent interest for a loan, an unsustainable amount.
Pumza also uses savings groups. Money gathered in the group’s ‘social fund’ can be pooled and used for larger expenses, for example, paying doctor fees when someone in her circle of family or friends falls unexpectedly ill.
Pumza expertly, and innovatively, juggles multiple informal financial service mechanisms to manage her income and expenses. But the question remains: what could Pumza achieve if she had access to more formal, local financial services such as loans, credit and savings accounts? And what if those services were tailored to her unique needs – both as a sheep intestine vendor and as a mother of four?
Client-centered financial services is the theme of The MasterCard Foundation Symposium on Financial Inclusion, taking place November 19-20 in Pumza’s city, Cape Town. At The MasterCard Foundation, we believe that reflecting the unique needs of clients, and respecting their existing financial management skills, is key to transforming the financial landscape in Africa into a fully inclusive one.