Can you actively manage five financial accounts?

In this excellent postKate McKee highlights the intensive financial life of Hiram, a smart Kenyan entrepreneur with a thriving car rental business.  Because one single institution cannot meet all his financial needs, Hiram has to patch together services from five different institutions. 

He has five financial accounts, each for a specific purpose –
1. Loan from an MFI
2. Loan from another MFI
3. Business account at a large international bank only to cash checks
4. Savings account at another bank to deposit cash
5. Mobile account (M-PESA) to allow him to receive electronic payments and reduce the amount of cash he needs to carry around.

The evidence is mounting that poor households rely upon an array of surprisingly complex financial tools, and lead active financial lives because they are poor, not in spite of it. They create “portfolios” that leverage both informal networks and formal institutions to address their immediate and long-term needs.

In Hiram’s case, each institution meets a specific purpose. The large international bank cashes his checks in two days instead of four days, which is a crucial benefit in helping him manage his cash flows.  But, the bank is expensive and charges for a savings account, forcing Hiram to open an account at another bank which offers a no minimum balance, zero cost savings account.

Hiram is able to balance his financial portfolio because he is relatively well-educated and resourceful; but this takes time and effort.  Imagine the productivity gains that Hiram, and other less resourceful entrepreneurs, might achieve if they didn’t have to constantly juggle their needs, and were, instead, able to meet their requirements at a single institution; the way you and I can.