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  • Writer's picturesalomon raydan

Financial Transactions at the Bottom of the Pyramid (First Delivery)

Updated: Feb 13, 2023

One of the obstacles in designing effective financial inclusion tools is that often, the creators of formal financial products are unaware of the transactions that take place at the base of the pyramit . In a recent meeting with members of the Uruguay Central Bank in charge of financial training, they confessed their ignorance about the financial culture of this people, making it difficult for them to design adequate training programs.

In our book "The Other Microfinance[1]", published a few years ago, the financial culture at the bottom of the pyramid is addressed and the transactions that are commonly performed are described, dividing them into savings and credit transactions, although it must be noted that at the bottom of the pyramid, credit and savings are linked operations. One almost always opens channels for the other.

It is important to understand that saving is an imperative need for low-income people, as lower income means generally less income stability. Therefore, poverty is not only defined by a lack of income, but also by its irregularity.

In the face of so much vulnerability, poor people need to save for their subsistence, which is supported by various investigations, such as those contained in the book "Portfolio of the poor". However, these people cannot save in the same way as people with greater resources, as their economy and needs require specific savings tools.

An important criterion is what I call "the appropriate distance". For example, as Rebecca Vonderlack y Mark Schreiner mention in their book "Women, Microfinance and Savings", “To save their savings, poor women must resist the demands of their children who need clothing, their husbands who want to drink or play, and their relatives and neighbors who require loans or gifts.". That means to save money in a place that is not too far away to be available in case of emergency, but not so close as to be spent on these demands.

Another criterion for saving is the "convertibility time", as low-income people save in many ways and need to be able to convert their savings into cash quickly in the face of urgent demands.

The financial transactions that result from these conditions are very particular and can hardly be understood from a formal banking perspective. In future deliveries, more about financial transactions at the bottom of the pyramid will be addressed.

[1] For free Spanish and/or English version, visit our page:

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