Managing Vulnerability: Using Financial Diaries to Inform Innovative Products for the Poor

This study presents findings from financial diaries of low-income people in Malawi and analyses ways in which they cope with vulnerability.

Financial diaries document all the economic transactions of households and individuals on a weekly basis. They provide insights into aspects that keep people locked in the vicious cycle of poverty. The 18-month study with Opportunity International Bank of Malawi (OIBM) compared OIBM clients against non-clients on key aspects of vulnerability. Findings include:

• 85% of households experienced at least one week out of 73 when they had no revenue;
• Zero-revenue week often coincided with an unanticipated event such as an illness or an accident that prevented them from working;
• Most households made one lump sum purchase every four weeks that was 1.5 times their weekly income;
• Use of formal financial services correlated with higher general household spending;
• Use of informal financial services was much more than that of formal financial services and formed part of a general pattern of financial dependence.

The study states that indigenous risk-pooling mechanisms in Malawian culture and informal savings practices meet the needs of low-income Malawians more than formal financial services do.