You may seen TV advertisements asking you to donate money to help people around the world for they live on $2.00 a day. In many western countries, although it is possible to live off of (2 x 365 or 730 dollars a year), it would be very difficult. In many western countries, there are few squatter areas as well as there are social assistance that should push that number up. An interesting book called Portfolios of the Poor was written by Daryl Collins, Jonathan Morduch, Stuart Rutherford, and Orlanda Ruthven published by Princeton University Press, 2009. The book is subtitled How the world’s poor live on $2 a day and the researchers went to a number of countries around the world and convinced people to keep a dairy of their financial transactions. How does money come in, what are the expenses, are there savings? what needs to be done to make the lives of people better?

It turns out the $2.00 a day while accurate for gross income, does not reflect the consistency of the money. Most of the world’s poor have very irregular income – which means some days are good, others are even tighter. The non consistency of money means having savings or some savings is critical to living. It also means that most of the poor will be borrowing money from moneylenders at high rates but depending on the flexibility to repay the loans, the loans are seen to be good value by the borrowers. The analysis by the authors shows in all income groups people do roughly the same thing – the difference is institutional supports. The wealthiest have the most, the poor have the least. For financial institutions dealing with the poor the principles of reliability, convenience, flexibility, and structure must be followed. When the principles exist taking account of the irregular income, the poor will use the institutions. It is noted many institutions often do not want to deal with the poor and are delighted other informal methods exist.

Linking to dividend paying stocks, all companies which cater to a broad market place will deal with the poor. A critical but important factor is poor people over the course of the year typically have access to money, most of it is not at the same time as obligations have to be met or the money comes in irregularly. Are they penalized or does the company use flexibility with them? Does the company want them as customers? Do the rules and regulations help or hurt customer relations? The internal rules and regulations of any company will determine the continuing ethics of its people and long term financial dealings. The longer you hold onto your stocks, the more you should look to the internal rules and regulations of the company to see if you should continue to hold it.

There are more questions than answers, till the next time – to raising questions.