Lessons learned from poor housewives saving money with Bkash
Poor people aren’t stupid, poor people are just poor. Sure, we all know that, intellectually, but we do all too often find it difficult to actually act that way. Like the varied bureaucrats and even too many of the do gooders — to them the poor are people to be managed into better behaviour, rather than people to be offered the opportunity to do what they know they want to do anyway.
An example of this is this newspaper’s report about Bkash. 300,000 women are availing themselves of savings opportunities in the app. Well, we might think that’s okay. Except two decades back that would have had economists standing gape mouthed in wonder. What, the poor want to save? But they haven’t got anything to save with! Nor would they want to save — the reason they’re poor is because they have short time horizons, surely?
Which leads us to a couple of things that economics has started to do rather better in the past couple of decades. One is something just from observation through the window of that ivory tower that all economists live in.
We — meaning as a general belief across the species — used to think that the poor needed to borrow. Then they could invest and become richer. There’s a great truth to this too — it’s the founding insight of Grameen. Or rather, Grameen saw that social pressure, standing, could provide the security for lending to poor people who had no other security.
Thus the lending groups, where only one of the group could have a loan at any one time — this creates social pressure to repay that first loan so that another can then borrow. As any husband (or would be one) will tell you, nothing like having the neighbourhood women observing to ensure adherence to the rules.
Then came M-Pesa, the electronic money system that started out across mobile phones in East Africa. There was a certain puzzlement because it was thought of purely as a payment system. Then people started to offer loans across it. Well, okay, that’s working with what was the common knowledge of the time. But observation showed that an awful lot of people were actually insisting on having positive balances in the system. Something it wasn’t really set up for but there we are, humans do stuff like that sometimes.
The mystery started to unravel a bit more in some basic income studies in India (“Basic Income: A Transformative Policy for India” but don’t buy it, grossly expensive. Get the library to get a copy). That idea, just give poor people some money, instead of India’s near absurd policy of the government buying food to send to ration shops, was studied in great detail. The first thing noted was that near any amount above the absolute subsistence necessity was saved.
Not saved in the sense of put by for decades for a pension. Or invested, to make a return. But everyone poor knew that income was variable. So, when there was an excess, put it aside for that inevitable time when income disappeared.
That basic income trial did produce an excess — the researchers were astonished that the first thing that happened was that people increased their savings, not their consumption. But, poor people don’t do that, do they?
And the answer is yes, poor people do do that. Because poor people aren’t stupid. They observe the world they live in, know that good times will be followed by bad soon enough. Therefore saving is rational to smooth consumption over time.
So we get to the first thing that economics has learnt from this. Which is that what the poor would really like is a method of savings. Something safe — the rats can always eat cash under the mattress, the mice nest in it. Or someone (did I mention husbands?) find and drink it. And thus the success of Bkash. Savings accounts, great things and not just for rich people.
But a much grander lesson here. When given the opportunity the poor behave economically rationally just like everyone else. So, at least part of our efforts to abolish poverty should be directed at giving the poor the same opportunities to be economically rational that the rest of us enjoy.
Yes, the ability to borrow is a good idea. Education for the children, obviously. Health care, why not? But as this reaction to variable income and the use of savings accounts — when available — to deal with it shows the poor are just as rational about life and money as anyone else.
Even, there’s something of happenstance in this about being rich. I am in the top 1% of world incomes (above 40,000 pounds a year). But then someone on average UK income (£33,000 a year) is in the top 2% of global incomes. Much more than anything else I’m rich because of the country my parents decided to get jiggy jiggy in. I’m most certainly not brighter, harder working or even — other than that place of birth — luckier than all those 99% poorer.
And that’s the real grand lesson from this. Those poorer than us deal with the problems of life in the same way we do — when they’re able to. So, when they’re able to then they will get richer, just as we do when we deal with the problems and opportunities the universe throws at us.
That’s the lesson to learn from poor housewives saving money with Bkash. Poverty is not something to be managed. It’s something to be escaped by giving the poor the tools to do so. Which, amazingly, happen to be the very same things that we ourselves use to not be poor.
Funny, but there we are. The solution to making everyone richer is to allow everyone to do the things that make people richer. Who, really, would have thought it could be as simple as that?
Tim Worstall is a senior fellow at the Adam Smith Institute in London.
Source: Dhaka Tribune.