In the previous article about a daily ‘financial diary’ research project in Bangladesh, we looked at the biggest expenditures made by our diarists (“When poor households spend big”). Here we tell the stories behind a few of those big expenditures.

 

A spending storm

We had been tracking Dipti, an illiterate brick-breaker with a disabled husband, since August 2015. For the first year and a half her biggest single purchase was 2,450 taka ($61 in PPP dollars) for subsidised rice. Then, starting in December 2016, she made eight of her ten biggest-ever expenditures within thirteen days.

Life-cycle events triggered this spate of big spending. On 16th December her husband died, and relatives gave her $140 to pay the immediate funeral expenses, like firewood (the body was cremated) and a burial cloth. Over the next ten days many more gifts came in, totalling $625, and by 27th she could arrange the funeral feast, buying food (with big amounts of milk and treacle), paying the event organiser, and paying the priest (she bought him a calf). These accounted for seven of her ten biggest-ever expenditures. Meanwhile, her married daughter was nearing childbirth, and came to Dipti’s house to prepare. On 8th January the child was born in a hospital, but, just in time, Dipti’s son-in-law provided $375 out of which Dipti paid a $302 hospital bill – her biggest ever outlay.

After that her spending returned to normal, and she has never again spent more than $50 at a time (again for subsidised rice). We had categorised Dipti’s household, based on their earned income, as extremely poor, living on $1.02 a day per person. But the total income – of which 61% is composed of gifts – pushes her up into the second-highest quartile (as described in the previous article). Dipti didn’t draw down any of her savings for the funeral or the birth, even though she had over $1,000 in MFI savings accounts, and no debts.  She continues to live modestly and save regularly.

Eight of Dipti’s ten biggest expenditures were for life-cycle events, were unplanned and uninsured, and were financed entirely by gifts from family and the wider community, a pattern that is not uncommon among our diarists – or at least among those enjoying good relations in the area.

A home builder

A handful of our diarists have spent big money building homes with remittances sent back by husbands and sons working overseas. Shankar’s home building is different. He had migrated into our area from a much poorer northern District, and worked as a construction labourer. He met and married a local woman, and now they run a snacks stall. In the morning they prepare the snacks in their rented home, and in the late afternoon he loads them onto a wheeled contraption and takes up his sales position at a busy road junction. They run the business on a cash basis, with each day’s takings financing the ingredients for the next day’s snacks: at about $30 a day this is usually their biggest expenditure.

After more than 17 years here Shankar had almost severed his ties with his own family back in his village. His three children, a girl of about 15 and two boys, don’t know their father’s original home. His wife’s family have become his. He doesn’t take MFI loans for his business, but in early 2016 he took a big MFI loan to give an interest-free loan (a ‘howlat’) of $375 to his wife’s brother to help him with the costs of getting his daughter married.

By the beginning of 2017 Shankar was feeling anxious about his own daughter. With no home of their own, how was he to attract a good husband for her? He could rely on his wife’s family for some help to build a house, but high prices meant buying land for it here was out of the question. He therefore had to use all his diplomatic skills to persuade his own family to let him take back his share of their joint homestead land in his home village, and at the same time persuade his wife’s family that any money they lent him would be well invested there.

He succeeded, and payments for building materials became his biggest-ever expenditures. The biggest of all was $1,450 for bricks, followed by $625 for roofing tin. These were financed by five separate howlats from his mother-in-law and brother-in-law, the biggest of which was $1,150, and by withdrawing most of the savings the couple had made at two MFIs, $650 at one and $550 at another. He did most of the construction work himself, which meant he was away for much of March through June 2017, when his wife and elder son continued with the snacks business.

This leaves us with two interesting developments to follow as we continue to track his transactions. Will he find a good husband for his daughter and how will he pay for the marriage? And how long will it take him to repay the howlats from his in-laws, and to rebuild his savings?

 

Sending money home

Billal is much younger than Shankar but like him came into our area as a migrant from a poorer District looking for work. Unlike Shankar he keeps in very close touch with his family back home, to the extent that eight of his ten biggest expenditures are the sums of money that he gives to his father. The family has some farm land, but is poor and uneducated. Billal is one of six children, five of them boys. He first came here as an eleven-year old, accompanying another migrant worker from his village who promised to help him find work. He went into the home of a rice-mill owner, worked hard, slept on sacks of rice in the storehouse, and gained the friendship of his employer’s family, who paid him a small wage and fed him. Over the 12 years he has been here, his wages have risen from about $1 a day to four times that. He spent almost nothing himself, and let his wages accumulate with his employer until there was enough money to justify a bus trip home to give the money to his father.

He has never had an MFI account, much less a bank account, but he was an early adopter of mobile-money transfers. We have recorded 27 times that he used ‘bKash’, the leading mobile-money service, to send cash to his father, in sums ranging from $15 to $230. He hasn’t opened a bKash account (which would allow him to store money on his phone and send it, at any time or place, to his father), because he finds that sending money ‘over the counter’ (that is, using the bKash agent’s account to make the transfer) has always worked well: his father similarly has no bKash account but collects the money without difficulty from the agent in his village.

The biggest amounts, though, have been handed over in person, and the biggest of all, $450, was in April this year, when Billal married and received a dowry payment from his bride’s family. There have been four other amounts of $250 or more that he has carried home or handed over when his father made one of his rare visits.

His wife is very much a local girl, the sister of one of Billal’s co-workers at the rice mill. One of our other diarists gets into quarrels with his wife because he continues to send money to his family in a distant village, while she thinks the money should be spent on his family here. It will be interesting to see how the mild-mannered Billal deals with that situation, should it arise.

 

Clever with money

We have two or three diarists whose biggest outlays, and biggest receipts, are financial in nature. Kadam Ali, who is about 50, is one of them. He has two professions: he breaks bricks (for use as aggregate in construction) and he is a faith-healer, or ‘kabiraj’. He is uneducated but shrewd.

In September 2015, not long after we got to know him, he took a loan of $750 from a big MFI. It came via his wife, who is the MFI client, and Kadam Ali complained loudly to us that he didn’t want this loan, had no use for it, and that the MFI was wrong to blackmail his wife into taking it by threatening to close her savings account. He sat on the money, telling us at one time that he would use it to repair his house and at another that he would lend it to a relative who was trying to get a job overseas. He did neither, but about a month later he handed the full $750 over to a friend who runs a shop, and that transaction was the biggest outlay we have seen him make. Again, there was ambiguity about the transaction, as Kadam Ali sometimes referred to the money as an interest-free loan to his friend the shopkeeper, while at other times telling us that his friend was ‘looking after’ the money for him (acting as his ‘moneyguard’ as we would say). Most likely, both were true. Time passed, then in early 2016 and again in early 2017 he took sums of $250 back from the shopkeeper and made informal interest-bearing loans to local men who needed the money. These loans were repaid in full with interest.

By September 2016 he had repaid the MFI loan, and his wife took another one, again of $750. This time, Kadam Ali didn’t complain. On the same day he lent $500 out to a local sharecropper as a ‘paddy loan’ – money lent at the beginning of a rice growing season to finance inputs and repaid with interest, after harvest, either in paddy or in cash. The loan was Kadam Ali’s third biggest ever outlay. In June of this year that loan was repaid in full, along with interest, and he placed $625 with his shopkeeper friend (the second-biggest outlay we’ve ever seen him make).

Kadam Ali represents a typical Bangladesh rural ‘moneylender’. Moneylending is not his main profession, nor even his main source of income, nor does he aggressively look out for borrowers. But he has reserves of cash that he keeps liquid, and he is in good standing at his wife’s MFI, so he is able to respond to requests for loans when a safe-looking one comes to his notice.

 

Using MFIs

The single-biggest expenditures of 11 of the 40 diarists reviewed here were sourced (wholly or primarily) from MFI loans, though in only four cases was the loan used to fund a small business, the stated aim of MFI lending (the others were used to repay loans, improve homes, or were saved or lent out to others). Another 5 of the biggest expenditures were sourced (wholly or primarily) from withdrawals from MFI savings, so altogether MFIs were involved in 16 of the 40 single-biggest expenditures. We end with a diarist for whom MFIs are important.

Nazneen is a housewife and the money manager of a poor, uneducated and somewhat chaotic family. Her husband was a colleague of Shankar (see above) and the family lived in a one-room hut which they rented from the mill owner, but he lost that job and now does day-labouring wherever he can find it. There are three children and a mother-in-law to be cared for in the home. On behalf of her family, Nazneen has made 5 expenditures bigger than 10,000 taka (PPP$250) in the time we have known her. Two of them were used to buy battery-assisted rickshaws for her son when he became old enough to start work. The first, a used machine costing $425, was bought using an MFI loan in June 2016 but was worn out within a year, and in April 2017 she took another MFI loan and spent $500 on a better machine, which is still in use. They are struggling, but just about managing, to make the weekly repayments to the MFIs.

Before we knew them, however, they had borrowed heavily from a private moneylender to buy some land in their home village, and have had a hard time managing to repay this loan. Nazneen’s other three big expenditures are repayments (of principal and interest) to this moneylender, sourced from MFI loans. All this has meant a lot of juggling between four MFIs, trying to guess which of them would give her the biggest loan most quickly and yet be least aggressive about on-time repayment. The MFI repayments, of course, absorb a big proportion of their income.  In the first seven months of 2017, for example, their total earned income was $2,793, and they paid out $1,024 on loan repayments to the MFIs. That doesn’t leave much to feed and house six people.

The strain shows on Nazneen’s face. But the moneylender loan has now been cleared and they are down to two MFIs. We will see if things begin to brighten for them from now on.

Stuart Rutherford
October 2017

 

 

The Hrishipara Financial Diaries Project is currently being funded by the UNCDF SHIFT Programme based in Dhaka Bangladesh, and we are grateful for their support.

Read more analysis based on the Hrishipara Diaries:

• How are Digital Financial Services used by poor people in Bangladesh?
• What the poor spend on health care?
• How the poor borrow?
• What do poor households spend their money on?
• Tracking the savings of poor households
• When poor households spend big

 

 

 

Note:  This article gives the views of the author/academic featured and does not represent the views of the Global Development Institute as a whole.