Research Methodologies: A Closer Look at the Research Behind Portfolios of the Poor – How the World's Poor Live on $2 a Day

How do the world’s poorest communities manage their financial lives?

This paper discusses the research methodology behind the financial diaries approach.

Financial diaries comprise data from nearly 250 poor households in Bangladesh, India, and South Africa. Researchers employed a team of interviewers to conduct bimonthly home visits and gather household information about money management. Data collected was used to create household-level balance sheets and cash-flow statements. Interviews focused on information gaps and imbalances, and researchers attempted to narrow the margin of error between recorded sources and uses of funds. The financial diaries approach:

  • Addressed the information gap in understanding how the world’s poor manage their finances;
  • Yielded new observations in activities, behaviors, constraints and opportunities;
  • Revealed high levels of financial activity;
  • Led to decreases in the margin of error in data collection;
  • Brought in clarity about poor household’s financial management;
  • Helped to understand microfinance services and devices from the users’ perspective.

The disadvantages of the approach include limited size of the survey sample, the possibility that survey participation influenced behavior and the lack of data on financial service providers.

About this Publication

By MicroSave