> Posted by John Gitau, CEO, Kenya Financial Education Centre
Written in 1910, a tiny book, The Science of Getting Rich by Wallace D. Wattles has relevance today in our financial inclusion efforts.
In one of the chapters, “How To Use the Will,” the author writes, “What tends to do away with poverty is not the getting of pictures of poverty into your mind but getting pictures of wealth into the minds of the poor. You are not deserting the poor in their misery when you refuse to allow your mind to be filled with pictures of that misery. Poverty can be done away with, not by increasing the number of well to do people who think about poverty, but by increasing the number of people who purpose with faith to get rich. If you want to help the poor, demonstrate to them that they can become rich; prove it by getting rich yourself.”
These words were written at a time when the American Titans of Industry – Cornelius Vanderbilt, Andrew Carnegie, and John D. Rockefeller – were generating millions of dollars from oil, steel, and commodities trading. The existence of poverty alongside such epochal abundance must have shocked Wallace Wattles deeply. He must have also witnessed the proliferation of poverty eradication efforts through charity and noted their failure or absence of impact.
His conclusion that the solution to poverty lay in the minds of the poor was bold and radical. He suggested that the poor needed inspiration to build pictures of wealth in their minds. That was not new, though. The very rich, in their biographies, acknowledge that they use the same resources accessible to everyone else to build their wealth. One thing they generously confess to and which is often doubted is that their wealth started with the pictures they built in their minds. Wallace must have known this, just like the rich during his era.
Fast forward 100 years, and here we are, advocates of financial inclusion with our financial capability recommendations for the poor. We are telling them that to come out of poverty they need to seek, among a raft of other services, formal financial services. Fortunately for us, we are more and better equipped with satisfactory amounts of data about poverty and the poor than poverty eradication experts a century ago.
The literature on poverty eradication efforts over the last 30 years reveals a plethora of intriguing developments. First, poverty has not disappeared. Second, charity has mushroomed. There are more philanthropists giving away lots of money than ever before. Foundations and trusts set up by the Titans continue to churn out millions of dollars to charitable efforts. Third, experts in poverty eradication, who recommend myriads of solutions, have multiplied. We in the financial inclusion field have joined the fray with our top down recommendations of tackling poverty through financial capability.
Our efforts, though well intended, are likely to face challenges due to some fatal assumptions we continue to make. Some of them are:
1. Studying the poor leads to understanding them. A mere observation of poor people’s behavior within their environments or while sampling synthetic financial products in controlled environments doesn’t lead to understanding them. Behavioral economists’ efforts are yet to bear reliable fruit. On the downside, the hypotheses we construct and our desire to test are already filters that distort the accuracy of our findings. We end up seeing what we want to see and making the wrong conclusions. So, when financial services providers use our findings to design products for the poor, they fail in the intended uptake and impact. Some products, such as microcredit, end up harming many users who become over-indebted.
While Financial Diaries reveal useful information on how the poor generate and manage their little money, it is doubtful if financial product designers are capable of translating the data into useful financial products, especially if they perceive serving the poor as unprofitable. Formal financial institutions to whom we assign the role of designing pro-poor products hardly participate in our discussions – evidence enough of their apathy.
2. The poor are poor because of economic conditions they find themselves in. In academic circles, it is increasingly reported that poverty creates a mindset of scarcity, un-deservingness, and inability. Would psychologists be able to suggest financial product features that have a bearing on desire for wealth, longing for a better life, self esteem, and deservingness?
3. The poor are different from us, their advocates. Most of us in the financial inclusion profession are learned members of the middle class. But if we are subjected to a financial capability test, we may not score significantly better than the poor. If we were good savers, personal debts would not be soaring as they are across the world. If we were better in budgeting, we would have more assets than liabilities in our books. We would be buying homes with big down payments, using debit cards, and driving cars we bought in cash from showrooms. We would be earning incomes from our multiple investments, and seeing our careers as personal fulfillment.
Therefore, we need to put our houses in order before telling the poor what to do or not to do. And before we forget, the poor are not specimens from another planet, but our brothers, sisters, cousins, uncles, and aunties whom we know quite well, though living in different circumstances from us. They do visit us, and we at times celebrate family events together. We need to be humble and learn from them how to manage little and erratic money.
4. Financial products have to be designed and sold to the poor. Financial services providers find it easy to design products for those with regular incomes. Financial products for the poor are difficult to design due to their irregular and tiny incomes. For providers, serving them presents logistical challenges due to the expected fragmentation of financial products to suit their needs.
If we start working on our assumptions and approach the poor to define what financial services they want, then we shall start to become worthy solution finders in the fight against poverty. And like Wallace Wattles said, we perhaps need to work ourselves out of poverty and become rich so that we can teach the poor how to come out of poverty. Before then, we might consider ourselves as the quasi-poor.
John Gitau is an independent financial education consultant and trainer and is the CEO of Kenya Financial Education Centre, an independent centre that supports and promotes financial inclusion efforts among the Kenya poor living in low-income neighborhoods. He does that using his home grown financial literacy curriculum, Practical Financial Literacy Counseling (P-FLC) adopted from the Global Financial Education Program (GFEP) developed by Microfinance Opportunities, Citi Foundation, and Freedom from Hunger.
Have you read?
The Earnings Component of Financial Capability: Experts Exonerated From Ignorance
Beyond Giving Hope – Religion’s Contribution to Financial Capability
Contemplating Scarcity and Its Implications for Microfinance and Poverty Alleviation
Facebook
Twitter
7 comments
Comments feed for this article
December 18, 2014 at 12:17 pm
Bobbi Gray
John, compelling and nicely written!
December 18, 2014 at 1:24 pm
Patricia
There is also another lesson to teach not only to the poor but mainly to the rich, dignity, integrity and respect, do not come from having money not even from having education. If you picture the image of a rich person in 2014, what do you see? do you want to be like that?
When the rich treat humanity with respect, dignity and integrity maybe the poor will want to be rich…
December 18, 2014 at 6:41 pm
Ignacio
What a sensible, sensitive call to humility. Thank you, John.
December 26, 2014 at 9:15 am
Getaneh Gobezie
Dear John
Thank you for this good observation!!
The poor really need inspiration. There is now increasing evidence from research that Aspiration Failure ( — individuals being unwilling to make pro-active investments to better their own lives…. ) is limiting the effectiveness, and potential impact of well-intentioned development interventions!!
Among the advocates, Arjun Apparaduri (2004): argues that argue that this is because while aspirations about the ‘good life’ exist in all societies, the ”capacity to aspire” is unevenly distributed; the rich are more aware of the various manifestations of the good life, which they use to improve their material conditions, while for the poor, they are likely to be more rigid, and less strategically valuable — not because of any cognitive deficit on the part of the poor but because the capacity to aspire, like any complex cultural capacity, thrives and survives on practice, repetition, exploration, conjecture, and refutation.
In a detailed study, CHF in 2007 similarly reported a much more convincing findings of ‘aspiration failure’ among the very poor from a detailed qualitative and quantitative survey conducted in the five biggest regions of Ethiopia. The study strongly argues that due to ‘satisfaction’ (or ‘happiness’) with one’s circumstances, and absence of ‘role models’ in the localities, there is a widespread occurrence of aspiration failure. IFPRI in its 2014 report highlights similar findings from Ethiopia and Pakistan.
Please read the interesting article at the following link at The Economist newspaper (by Mrs Esther Duflo) titled: HOPE SPRINGS A TRAP — AN ABSENCE OF OPTIMISM PLAYS A LARGE ROLE IN KEEPING PEOPLE TRAPPED IN POVERTY
http://www.economist.com/node/21554506?fsrc=scn/ln_ec/hope_springs_a_trap&goback=%2Egde_1795011_member_118043578
So development interventions need to plan potential solutions for this.
Regards
Getaneh (getanehg2002@yahoo.com)
December 28, 2014 at 9:24 am
John Gitau
Ignacio, like truth, humility is simple. Thanks Getaneh for your confirmation that research has actually been done in this facet. I would like to read more as I suspect lack of inspiration could be the static in financial capability efforts; obliviously. I have now read Esther’s piece and I like it. Indeed, it is difficult to be inspired while surrounded by poverty. While those who can afford are not limited to their habitat and can move mentally and physically around the world picking inspiring trends and life goodies to desire, the poor are almost confined geographically and even when they get to interact with those well to do, the divide is clearly drawn.
December 29, 2014 at 8:58 am
Getaneh Gobezie
Dear John,
Thank you again. … BTW, I am happy that you also mentioned THE SCIENCE OF GETTING RICH (By Wallace D. Wattles).
Most relevant research on ”Aspiration Failure” are from IFPRI. I hope you would create the time to read an interesting chapter in the recent (2014) IFPRI Book: Resilience for Food and Nutrition Security. The article (just 8 pgs) is titled: ”Promoting Aspirations for Resilience among the Rural Poor”, and can also be downloaded from:
http://www.ifpri.org/sites/default/files/publications/oc79ch11.pdf
The IFPRI researchers recommend several solutions …. In case of Ethiopia, awarding ”Role Model” farmers, business-women (in big public meeting!!) was an instrument to inspire others. Some MFIs present cases of successful clients at group, or center meetings. …. During the previous regime’s ”Five Year Development Plans” farmers ‘cooperatives’ were supported to spread in rural areas — tasked to avail modern agricultural input to rural villagers, as well as other ‘industrial goods’ (TVs, Radios, soap, modern clothes for women, children, etc) which can incite, inspire poor rural farmers to work hard so as to generate income to buy these items … From our previous discussion, Dr. Susan Johnson (Univ of Bath, UK) call these ‘incentive goods’.
What do you think? What tools do you introduce in your financial education programmes?
Thanks again
Getaneh
December 30, 2014 at 5:04 am
John Gitau
The portion of IFPRI research findings that Getaneh has attached makes very interesting reading with practical and easy to implement insights. It is a must read for all of us. It goes to show that, if we get serious in helping the low income people improve their material lots, we don’t need to study rocket science to do it. Simple tweaks alongside what they already know and are doing can contribute immensely to their livelihood well-being and ability to cope with future shocks.
Thank you Getaneh for your support with this useful information. The first part of the paper turned my thoughts upside down. I couldn’t help reminiscing on what Ignacio Mas wrote in his Metamon paper in relation to shock absorption strategies for the poor. He coined and described buffering strategy as the creation of capacity to absorb shocks either by building up a pool of assets that can be sold off in case of need or by creating avenues to borrow or receive support from others in the community. The poor, he said, when not busy creating a buffer of salient goals to meet emergencies, are busy building buffering capacity by creating fuzzy goals to cater for larger emergencies-which I suppose includes weather related shocks. He describes a portfolio of fuzzy assets designed and retained as arsenals to counter emergencies and shocks.
The beauty of Ignacio’s shock absorption mechanics is their inherent instinctive nature developed out of unique experiences and therefore home grown. In his intriguing style of thought, he proposes that the poor have an idiosyncratic way of taming their aspirations as a defense mechanism against them( aspirations) being sources of discomfort and torture. So, some aspirations are deliberately left undefined while still being left lurking in the background. How do we even measure such aspirations?
Now, here is the source of my dilemma. IFPRI is saying that however instinctive and profound these buffering mechanisms can be, weather shocks in particular do not only deplete the incomes and assets of the poor but also tamper with the aspiration for the future. Therefore, creation of resilience strategies to restore livelihoods of the poor today while also raising aspiration for the future should be the inevitable deliberate pursuit. This can be done, they recommend, through myriad of investments and policies that respond to such shocks by helping the poor rebuild their assets and prior livelihood as well as rebuilding their resilience to recover their aspirations. This is a great agenda that needs support as long as it is not a placebo that helps distort the survival instincts of the poor.
I am guessing that Ignacio Mas would recommend interventions that fortify these instincts so that the poor are better able to overcome any shocks that come( kind of fortifying the immune system as opposed to creating more medicine). To me, any intervention, physical or policy based( not unless it is emergency based eg floods) that is not long lasting would not be any different from taking wild animals to the zoo and feeding them to their fills while slowly distorting their natural survival instincts. They need be those that will reduce poverty and build resources based mechanism of shocks absorption The practices that Getaneh describes in Ethiopia as a result of IFPRI intervention are such good type of interventions.
Getaneh you asked how I inspire the poor through financial education. First, my practical financial literacy model makes it easy for me to inspire my poor clients. I use praise heuristics a lot around the customers micro businesses. My conversations with them is as casual as it can get applauding their thoughts while posing challenges to them whose solutions they verbalize themselves. My take is always that they know what they do better than I do and mine is to cheer them on while asking them questions they may not have missed to ask themselves. Questions have answers tagged on them, if relevant. Let me give an example. yesterday I visited Ms. Linet my client, a mother of four and separated from her abusive husband. She sells boiled maize on the roadside in one low income residential estate I set up an office two months ago. On looking at her steaming sufuria full of maize combs, I remarked ” I can see Linet you don’t like seeing hungry people without wanting to feed them and today you are feeding the whole estate?”. She laughed loudly and said ” They will finish this and I will put another lot that will take me all the way to evening”. I then asked her why she hasn’t thought of having another cook stove and sufuria to boil an extra lot of maize combs ( a bigger stock) to save time and enjoy economies of scale. She replied that she is aware of the need to do that but she doesn’t have capital. I asked her how much that would be. She did her calculation and looked surprised it wasn’t so much as she thought. She even suggested it was something she can do in a weeks time if she saves deliberately for it. I then asked her to tell me what that would mean in terms of extra revenue generation. She worked out the numbers and she appeared surprised to discover how she has been denying herself the extra money by assuming it wasn’t doable but happy that she can now do it. I didn’t tell Ms Linet anything new apart from posing a challenge to her and actually making her do the numbers on the spot. To me, that has an inspirational value than perhaps giving a micro loan and leaving a borrower to her peril If Ms Linet will take action, it will be because my conversation with her inspired her to see enhanced income from a doable set of activities This is a basic example among the many techniques I use to inspire the poor I interact all the time.