Posted by: Micol Pistelli
This week, we ask a question that is of great interest to many people in the microfinance industry: How can an MFI measure poverty in a credible and practical way? Many MFIs demonstrate a strong focus on poverty in their mission statement but few are able to give an accurate estimate of the share of their clients who live below certain poverty lines.
Standard methods of measuring poverty have proven impractical and pose several problems related to data collection, analysis, and interpretation. Further, their accuracy is frequently unknown.
However, among the poverty measurement tools available, two are directly derived from international and/or national poverty lines and prove to be both accurate and easy to use: the IRIS Poverty Assessment Tool (PAT) and the Progress out of Poverty IndexTM (PPI).
- Simple to administer – each PPI interview lasts only 5-10 minutes, while a PAT can be administered in a 10-20 minute interview
- Cost-effective – materials are free and implementation is low cost
- Accurate – each PAT and PPI is calibrated to that country’s nationally representative household survey
How do poverty measurement tools relate to the MIX Social Performance Report?
The social performance report has four indicators related to poverty assessment and progress out of poverty. A MFI that uses one of the poverty measurement tools above is well positioned to provide information on these four indicators and satisfactorily complete the poverty measurement requirements.
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