The Financial Diaries: Investigating the Financial Lives of the Poor in South Africa

This short paper provides a snapshot of the financial lives of poor South Africans. The survey covered urban, peri-urban and rural areas and recorded detailed daily cash flows of 166 households over a 13 month period between November 2003 and December 2004.

The paper first identifies and defines the gamut of formal and informal financial services available to the households within the purview of the study.

The study finds that:

• The poor have complex financial lives most households use a range of financial services to meet their money needs;
• Savings instruments are event-bound - usually for marriage, burial, or other routine family events;
• The poor are subject to frequent financial events - including requests to contribute to funerals, traditional feasts, crimes, injury or illness, loss of a regular job, births, and weddings;
• The poor who have access to grants also use a variety of financial instruments;
• While nearly all households pay some form of debt every month, there is a wide divide between those who are heavily indebted and those who are minimally indebted;
• Survivalist businesses are difficult to sustain. A clear credit strategy is important.

The paper ends with six household profiles from both rural and urban areas, at different income levels, and varying levels of success. These profiles detail each household's use of financial instruments - insurance, savings, credit, and providing financial services to others.