In Asia's villages, girls often wear gold. Photo credit: Vincent Johnson
A few years ago, in a small village in Kampong Chhnang, I met Ms. Cheng Yeng. In her early 40s and mother of 3 grown children, Ms. Cheng was clearly an excellent household money manager – bright, articulate, and shrewd. She told me that she uses cash earned after her rice and palm sugar harvests to buy gold, last year at $38.50 per chi.
Yet in the months before the harvest she sells most of the gold to help get her family through the hungry season, even though the price drops sharply then – last year to less than $31 per chi.
“That means you lost about 20% on your savings over 8-9 months” I observed. “Was it a bad year?”
“No” she said calmly. “I’ve done this for years and I usually lose money. I’ll do it next year, too.”
I took a deep breath. “Why?” I asked (though I wanted to scream it).
Her smile tightened against her neat jet hairline. “If I keep the cash in the house what will happen to it? My husband will want some. My children will want some. By October [when the hungry season starts] there will be nothing. Gold is much better. You can’t spend it on small things.”
About 10 gold traders control her village market. The price in the village bears little relationship to global standards; many villagers buy after the harvest and sell before it. It’s a very profitable business.
villagefinance 
Rapid conversion of available cash into ‘goods’ – in this case, gold minimizes liquidity yet is convertible enough to act as working capital during the dry season. I wonder if the loss in the price drop during the selling season for the gold is a better return than bank charges for those same savings?
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Very well put! Bank charges by themselves would probably not lead to this type of practice. But if you include the cost of several trips to a bank that is 10 or 20 kms away, and the psychological cost of being dependent on bank officials you don’t know, and bank systems you don’t understand, to access your savings — it all starts to add up.
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