Why would poor people need financial services?                                             I want to help someone today

"The great challenge before us is to address the constraints that exclude people from full participation in the financial sector... Together, we can and must build inclusive financial sectors that help people improve their lives."
- Kofi Annan, UN Secretary General

It's easy to imagine poor people don't need financial services, but when you think about it they are using these services already, although they might look a little different.

"Poor people save all the time, although mostly in informal ways. They invest in assets such as gold, jewelry, domestic animals, building materials, and things that can be easily exchanged for cash. They may set aside corn from their harvest to sell at a later date. They bury cash in the garden or stash it under the mattress. They participate in informal savings groups where everyone contributes a small amount of cash each day, week, or month, and is successively awarded the pot on a rotating basis. Some of these groups allow members to borrow from the pot as well. The poor also give their money to neighbors to hold or pay local cash collectors to keep it safe.
However widely used, informal savings mechanisms have serious limitations. It is not possible, for example, to cut a leg off a goat when the family suddenly needs a small amount of cash. In-kind savings are subject to fluctuations in commodity prices, destruction by insects, fire, thieves, or illness (in the case of livestock). Informal rotating savings groups tend to be small and rotate limited amounts of money. Moreover, these groups often require rigid amounts of money at set intervals and do not react to changes in their members' ability to save. Perhaps most importantly, the poor are more likely to lose their money through fraud or mismanagement in informal savings arrangements than are depositors in formal financial institutions."- (CGAP)

Why don't they just go to a bank?                                        Let me make a difference in someones life today

"The poor rarely access services through the formal financial sector. They address their need for financial services through a variety of financial relationships, mostly informal." (CGAP)

Why is this? For a moment pretend that you are a poor goatherder walking into a bank:

You don't have any money to open a savings account with

You don't have any collateral to secure a loan with

You don't have a credit record as you have never been formally employed and you've never taken out a loan before

You might even be unable to complete the necessary paperwork as you are illiterate.

Formal financial institutions were not designed to help those who don't already have financial assets – they were designed to help those who do. Imagine trying to get a loan in the United States without any savings, an employer or a credit report.
So what do poor people do?

"Credit is available from informal commercial and non-commerical money-lenders but usually at a very high cost to borrowers. Savings services are available through a variety of informal relationships like savings clubs, rotating savings and credit associations, and mutual insurance societies that have a tendency to be erratic and insecure." (CGAP)

"Poverty is not created by the poor. It is created by the structures of society and the policies pursued by society. Change the structure as we are doing in Bangladesh, and you will see that the poor change their own lives. Grameen's experience demonstrates that, given the support of financial capital, however small, the poor are fully capable of improving their lives."

- Banker to the Poor
- Muhammad Yunus, Grameen Bank, Founder