Money Mosaics: Financial Choice and Strategy in a West Delhi Squatter Settlement

This paper highlights weak foundations of some of the assumptions that development organizations and financial institutions make about urban poor:

• Poor people lack social capital;
• Poor people prefer low interest rates even at high transaction costs;
• People are poor because their access is limited to services available through informal sector.

The paper discusses the extent to which people are able to put together effective money management strategies through available devices and the extent to which new or existing providers can step in.

The paper broadly distinguishes different types of relations and the range of financial devices contextualized within them:

• Social security relations: Providers of free services with no strings attached;
• Relationship of shared origin: Providers of interest free loans, groceries on credit;
• Patron-client relations: Providers of private loans on interest;
• Formal family relations: Providers of larger interest free loans;
• Tied economic relations: Employers providing wage advances.
• Professional relations based on commercial transactions: Professional moneylenders, sellers of goods on credit.

The paper highlights following for prospective providers:

• Striking dearth of safe and reliable current-account and instant-saving services;
• An integrated approach design for the link between entitlement to work and financial management devices;
• Keep transaction cost low even at the expense of higher interest rates.