The New York Times: How Credit-Card Debt Can Help the Poor

Today The New York Times features a perspective from Shaila Dewan on the importance of credit and saving in the lives of the poor.  Dewan highlights that life without credit can be expensive and severly limiting in terms of accessing housing and other services or dealing with emergencies.  She also notes that savings and credit are interconnected and quotes FAI's Jonathan Morduch on his own observations of the relationship between this activities from his research in Bangladesh:

From a behavioral-economics perspective, borrowing can actually be easier than saving, and not just because it offers instant gratification. While a vow to save $100 a month may quickly go the way of many diets, owing someone else $100 a month is a powerful motivator. Jonathan Morduch, an economist at New York University who studies the spending habits of low-income families, tells the story of Khadeja, a woman from Bangladesh who borrowed money at 36 percent interest to invest in gold jewelry. She knew she would most likely never be able to save enough to get it, but she would be sure to make her payments to the lender. 'Khadeja saw the truth of an odd-sounding paradox,' Morduch and his co-authors wrote in Portfolios of the Poor: How the World’s Poor Live on $2 a Day. 'If you’re poor, borrowing can be the quickest way to save.'

For more on how savings and credit impact the poor, click here to read the complete article.