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Myth: People Living "Hand-to-Mouth" Don't Need a Bank Account

January 21, 2014

Five years ago, I was pretty new at the Gates Foundation and I was given a new book, Portfolios of the Poor, to read. On the very first page, it bust a myth that I didn’t even realise that I believed, let alone realise that it was a myth. It says: 

“For those of us who don’t have to do it, it is hard to imagine what it is like to live on [a dollar a day]. We don’t even try to imagine. We suppose that with incomes at these impossibly low levels, the poor can do little for themselves beyond hand-to-mouth survival.”

And there in those short lines, what I had always thought of as an innocent and descriptive, phrase, living “hand-to-mouth,” is shown to be a huge and unhelpful myth about what it is like to live in extreme poverty. 

It creates an impression that people spend the little money they earn, the moment they are paid. And if that’s what they do, why do we need to care that two billion poor people don’t have access to bank accounts. They have nothing to put in them. 

Right? Wrong. 

Most people living on a dollar a day, don’t literally get that amount each day. That’s just an average over time. How much money a poor person earns one day, might determine whether they have one meal or two, as Jeff Raikes describes in this blog from Kenya last year. But they also have to manage their money to make sure they can eat on the days they don’t earn anything. 

Yes it’s true that people living on a dollar a day spend up to 80 cents of that on food. But for everything else, you probably need to save up. Whether that’s to cope with emergencies like your children falling ill, or expensive things like a roof over your head, let alone opportunities like starting a small business.

In Portfolios of the Poor, the authors very entertainingly use the stories and financial diaries of over 250 families in South Africa, India and Bangladesh, to explain the extraordinary range of financial calculations a family has to make to stretch their income, sometimes over a whole year if they are a farmer with one harvest. And they show the huge variety and ingenuity of methods they have to use to manage their money, because they mostly don’t have access to even basic financial services like a savings account, or theft insurance.

Since reading Portfolios of the Poor, I have gained a bit more insight into trying to manage a budget of £1 a day, just for a week, by taking the Live Below The Line challenge. For the first two years, I spent weeks planning how to spend my £5 to get me through the week. Last year, I tried living literally on £1 a day, and that was even harder. If you want to understand just a bit what it’s like to live in extreme poverty, you can take the challenge in 2014. Sign up here.

The foundation is working hard to make it affordable and easy for banks and other providers to offer bank accounts to poor people, by using digital money and the power of mobile phone technology. 

Africa is leading the world in terms of using mobile money and that really busts the myth that poor people don’t need bank accounts. In fact, they are rushing to use mobile money in their millions. And we are trying to ensure that millions, can become billions. 

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