Ngern Tid Lor advocating the translation of two books—Poor Economics and The Poor and Their Money—may make people wonder why the company is paying attention to books in an age where print publishing is said to be dying.
The best person to give you an answer to this matter is Mr. Piyasak Ukritnukun, Managing Director of Ngern Tid Lor.
Piyasak tells us that the idea and reasons for advocating these two books are linked to the ‘vision’ and ‘mission’ of Ngern Tid Lor: To improve vehicle title loan and insurance service standards in order to make financial products and services accessible to grassroots people (and help solve problems for the poor).
It started from an effort to help other people in society to understand the motives and behaviors that influence poor people’s financial decisions and other issues in their daily life.
“For quite some time, we’ve attempted to help people to understand what ‘financial inclusion’ is. At Ngern Tid Lor, although we took our team on a study trip to Indonesia and Italy and continued to collect information about this topic, we have always felt that we had not been able to explain it well and clearly enough, which meant we were unable to attract interest and get policy makers involved in changing methods or rules to make financial resources more accessible and convenient to grassroots people and the poor, or to help them manage their money better.
We need to find a new way to achieve this, and I think the two books that may best provide insight to our answer are “Poor Economics” by Abhijit V. Banerjee and Esther Duflo, winners of the 2019 Nobel Prize for Economics, and “The Poor and Their Money” by Stuart Rutherford and Sukhwinder Arora. Because both books are written in English and are difficult to read, I think they should be translated into Thai language that is clear and easy to understand, and that the books should be more accessible for a wider range of people.”
Although these books will help readers to understand financial thinking and behavior of the poor, they offer new insight. As Piyasak tells us:
“For me, I think ‘Poor Economics’ speaks very clearly about the motives, behaviors, and decision making of the poor on everyday matters. The reason why they think and behave the way they do is ultimately linked to poverty, which causes a “lack of opportunity” to receive the same things as the middle class and the rich, such as basic utilities like electricity or a water supply. While the middle class and the rich never have to think about where to find clean water—they only need to turn on the tap and water will magically come out—the poor have to because many systems and products are not specifically designed or prepared for them.
Banerjee and Duflo, the economists who wrote this book, have conducted rigorous research which led them to understand why the poor do not deposit their money in a bank, why they do not eat healthy food, and why they do not get vaccinated, instead letting themselves become ill from vaccine-preventable diseases. For the poor, for example, it is not worth spending money to travel to a bank to deposit a savings of 200-300 baht; they could lose that day’s earnings and money to buy food. Therefore, it is not that they do not know but it is because various circumstances, conditions, and factors demand that they make different decisions.
Why do the poor buy lottery tickets and gamble? This is, in fact, because they have no hope of getting rich by saving money. However, they have wants, which all of us do. They want 100,000 baht, so they try to get that by winning a lottery. Or, why do poor people buy a TV instead of saving money for something that matters? It is because they live a stressful life as they struggle every day to make money. They need to relax, as all of us do. This book is insightful and will help us to better understand poverty.
Once we understand poverty, we will be able to design products or processes to give the poor new experiences that can change their behaviors. One example of such products is accident or car insurance, which we know is important, because if a poor person has an accident without insurance, their life will be much more difficult as they do not have money for medical treatment and cannot work to generate income during their injury. Or, when the car—which is their means of making a living—is in need of repair, they have to borrow money to pay for the expenses if they do not have car insurance. However, when Ngern Tid Lor started to sell insurance to the poor, none of them wanted to buy. So we decided to offer vehicle title loans with free personal accident insurance coverage. This free sample strategy aimed to change consumer behavior. They do not mind having something as long as they do not have to pay for it. After using our free insurance, many customers saw its benefits and continued buying it. Some even buy insurance for their children, spouses, and parents.
I think that if we had not given them free insurance samples and they had not had a chance to try using it, they would not have thought about buying insurance regardless of what we said or explained.
‘The Poor and Their Money’ provides a description of how poor people use ‘financial intermediaries’ to manage their money. While banks are intermediaries between well-off people who deposit their money at banks and people borrowing money from banks, poor people also have their intermediaries, which can take many forms. One example is a ‘rotating savings and credit association or ROSCA’ where people wanting to save money contribute an equal agreed amount on a regular basis and a member wanting to withdraw a sum from the common fund has to pay interest to others who are still making contributions. The member withdrawing the last lump sum will receive more cumulative interest than others.
This book also points out that saving and borrowing are essentially the same, the difference being one will allow you to get a sum of cash to meet your needs quicker than the other. For example, if you want a 20,000-baht mobile phone, you may save 2000 baht a month for 10 months and then buy the phone or you may choose to borrow money to buy the phone first and then make a repayment of 2000 baht per month with interest. These two options are not behaviorally different, it is just that one lets you get hold of sums of money faster than the other. This is the principle underpinning the purpose of pawnshops and title loans, which is to allow people to turn their paid properties into sums of cash for use in times of need.
Rule makers who do not understand the behavior or nature of the poor require that borrowers must have collateral or show proof of income to be approved for loans. But what if a borrower does not have a proof of income because he is self-employed and I know that he has been paying 3,000 baht a month for his motorcycle for 20 months, why can’t I let him pay 500 baht a month?
This book sheds light on the wisdom of designing products and processes to allow people in financial trouble to get hold of money, for example, a savings system in which a deposit collector goes to a wet market to collect 100 baht every day from people who want to save, returning lump sums to them at an agreed time with a 10 percent fee deduction. Everyone in the market is thankful for this kind of service, which allows them to save lump sums. However, if you look closely, this kind of service is not much different from the informal financial system, only that the informal system lends you a lump sum of money first and then collects repayment later with interest.
Thus, as we can see, poor people always want to save, and they also need money, but banks or financial institutions have not had a way of lending them such sums. I think that digital technology and fintech provide a good opportunity to turn the game around at a lower cost and make products and services more accessible to the poor.
The people whom Piyasak wants to read these two books are not the poor but those involved in making financial measures or regulations, financiers, bankers, politicians, ministerial officials, businesspersons, and the general public, including Ngern Tid Lor employees.
“I believe that if they read these books, they will better understand the motives affecting the behaviors of poor people, who make up a large population group of our country. Once understood, they will be able to devise rules or processes and design products that truly meet the needs of the poor.”
This project is part of Ngern Tid Lor’s efforts, as we believe that providing knowledge in any form to create financial betterment for “the poor” is one of our core missions.