This page is about the background and theory behind our work in money management services for the poor & very poor

Rutherford watched with interest when MFIs, like Grameen Bank, emerged in the 1970s to serve the poor. The new MFIs focused sharply on loans for microbusiness development, but Rutherford guessed that many clients would pay lip-service to this ideal, and use the new savings and loan services to satisfy their wide range of pressing money-management needs. Several research studies have shown that this insight was correct.

Rutherford found that poor people are often active money managers. They push a large part of their cash through a wide variety of instruments. Whenever they get the chance, they use formal services like banks and insurance companies, and semi-formal ones like microfinance institutions (MFIs). Much of the time, though, they have to rely on informal services (like moneylenders or deposit takers), informal  devices like savings and loan clubs (many of these are of great sophistication), and on do-it-yourself banking such as saving at home or with relatives. But why should poor people be such heavy users of savings and loan services and devices?

Their small incomes are irregular and uncertain, so poor people can rarely buy anything other than small-scale daily needs out of today`s cash-in-hand. They`re therefore driven to find ways of financing major expenditures out of past income (through saving) or out of future income (by taking loans). This function, shifting income through time, is the main task done by financial services. Poor people are heavy users of such services because they need to manage the many large expenditures they face - life-cycle events, crises and opportunites. The key to their money management is saving: the poor look for ways to `save up` (to create a usefully large sum of money by storing it somewhere) or to `save down` (taking a loan and repaying it later out of future savings). All loans are essentially advances against future savings.

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Click here for a shortlist of writings by Rutherford and colleagues. See websites for the three main books at The Poor and Their Money; The Pledge; and Portfolios of the Poor

For thirty years, Stuart Rutherford has been talking to poor people about how they manage their money. This took him into slums and villages in Mexico and Nicaragua, in Kenya, Burundi, Rwanda, Somalia, The Gambia, Uganda, Tanzania and South Africa, and in China, The Philippines, India, Bangladesh, Pakistan, Nepal, Sri Lanka, Vietnam, Cambodia and Thailand. ActionAid, his employer for much of 1978-1992, helped, as did his Fellowship at the Brooks World Poverty Institute, Manchester University UK. Research contracts carried out for many international, national and private organisations have also proved stimulating.