The Poor Need Inspiration. Is There Room for It in Financial Inclusion?

> Posted by John Gitau, CEO, Kenya Financial Education Centre

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Written in 1910, a tiny book, The Science of Getting Rich by Wallace D. Wattles has relevance today in our financial inclusion efforts.

In one of the chapters, “How To Use the Will,” the author writes, “What tends to do away with poverty is not the getting of pictures of poverty into your mind but getting pictures of wealth into the minds of the poor. You are not deserting the poor in their misery when you refuse to allow your mind to be filled with pictures of that misery. Poverty can be done away with, not by increasing the number of well to do people who think about poverty, but by increasing the number of people who purpose with faith to get rich. If you want to help the poor, demonstrate to them that they can become rich; prove it by getting rich yourself.”

These words were written at a time when the American Titans of Industry – Cornelius Vanderbilt, Andrew Carnegie, and John D. Rockefeller – were generating millions of dollars from oil, steel, and commodities trading. The existence of poverty alongside such epochal abundance must have shocked Wallace Wattles deeply. He must have also witnessed the proliferation of poverty eradication efforts through charity and noted their failure or absence of impact.

His conclusion that the solution to poverty lay in the minds of the poor was bold and radical. He suggested that the poor needed inspiration to build pictures of wealth in their minds. That was not new, though. The very rich, in their biographies, acknowledge that they use the same resources accessible to everyone else to build their wealth. One thing they generously confess to and which is often doubted is that their wealth started with the pictures they built in their minds. Wallace must have known this, just like the rich during his era.

Fast forward 100 years, and here we are, advocates of financial inclusion with our financial capability recommendations for the poor. We are telling them that to come out of poverty they need to seek, among a raft of other services, formal financial services. Fortunately for us, we are more and better equipped with satisfactory amounts of data about poverty and the poor than poverty eradication experts a century ago.

The literature on poverty eradication efforts over the last 30 years reveals a plethora of intriguing developments. First, poverty has not disappeared. Second, charity has mushroomed. There are more philanthropists giving away lots of money than ever before. Foundations and trusts set up by the Titans continue to churn out millions of dollars to charitable efforts. Third, experts in poverty eradication, who recommend myriads of solutions, have multiplied. We in the financial inclusion field have joined the fray with our top down recommendations of tackling poverty through financial capability.

Our efforts, though well intended, are likely to face challenges due to some fatal assumptions we continue to make. Some of them are:

1. Studying the poor leads to understanding them. A mere observation of poor people’s behavior within their environments or while sampling synthetic financial products in controlled environments doesn’t lead to understanding them. Behavioral economists’ efforts are yet to bear reliable fruit. On the downside, the hypotheses we construct and our desire to test are already filters that distort the accuracy of our findings. We end up seeing what we want to see and making the wrong conclusions. So, when financial services providers use our findings to design products for the poor, they fail in the intended uptake and impact. Some products, such as microcredit, end up harming many users who become over-indebted.

While Financial Diaries reveal useful information on how the poor generate and manage their little money, it is doubtful if financial product designers are capable of translating the data into useful financial products, especially if they perceive serving the poor as unprofitable. Formal financial institutions to whom we assign the role of designing pro-poor products hardly participate in our discussions – evidence enough of their apathy.

2. The poor are poor because of economic conditions they find themselves in. In academic circles, it is increasingly reported that poverty creates a mindset of scarcity, un-deservingness, and inability. Would psychologists be able to suggest financial product features that have a bearing on desire for wealth, longing for a better life, self esteem, and deservingness?

3. The poor are different from us, their advocates. Most of us in the financial inclusion profession are learned members of the middle class. But if we are subjected to a financial capability test, we may not score significantly better than the poor. If we were good savers, personal debts would not be soaring as they are across the world. If we were better in budgeting, we would have more assets than liabilities in our books. We would be buying homes with big down payments, using debit cards, and driving cars we bought in cash from showrooms. We would be earning incomes from our multiple investments, and seeing our careers as personal fulfillment.

Therefore, we need to put our houses in order before telling the poor what to do or not to do. And before we forget, the poor are not specimens from another planet, but our brothers, sisters, cousins, uncles, and aunties whom we know quite well, though living in different circumstances from us. They do visit us, and we at times celebrate family events together. We need to be humble and learn from them how to manage little and erratic money.

4. Financial products have to be designed and sold to the poor. Financial services providers find it easy to design products for those with regular incomes. Financial products for the poor are difficult to design due to their irregular and tiny incomes. For providers, serving them presents logistical challenges due to the expected fragmentation of financial products to suit their needs.

If we start working on our assumptions and approach the poor to define what financial services they want, then we shall start to become worthy solution finders in the fight against poverty. And like Wallace Wattles said, we perhaps need to work ourselves out of poverty and become rich so that we can teach the poor how to come out of poverty. Before then, we might consider ourselves as the quasi-poor.

John Gitau is an independent financial education consultant and trainer and is the CEO of Kenya Financial Education Centre, an independent centre that supports and promotes financial inclusion efforts among the Kenya poor living in low-income neighborhoods. He does that using his home grown financial literacy curriculum, Practical Financial Literacy Counseling (P-FLC) adopted from the Global Financial Education Program (GFEP) developed by Microfinance Opportunities, Citi Foundation, and Freedom from Hunger.

Have you read?

The Earnings Component of Financial Capability: Experts Exonerated From Ignorance

Beyond Giving Hope – Religion’s Contribution to Financial Capability

Contemplating Scarcity and Its Implications for Microfinance and Poverty Alleviation