WHY WOULD THE POOR CHOOSE TO ACCEPT A NEGATIVE INTEREST RATE ON THEIR MONEY? This Economist article (November 15, 2014) points out that: “In Ghana and other West African countries people deposit savings with Susu collectors, who take small deposits each day and hold on to the cash for their clients for a fee. Similar informal savings accounts exist in India and the Philippines.” The article uses this as an example of how some poor people are willing to receive a negative interest rate. Bank accounts are too expensive, and paying a smaller custodial fee is better than keeping money at home in a proverbial mattress. In addition to avoiding the risk of theft, the problem of “pleading relatives” is avoided.
Although the practical problems are different, in the case of both rich and poor, a negative interest rate is a way of looking at a payment for custodial services.