Measuring the Mission

Are MFIs reaching the poor and poorest in large numbers? Are their clients moving out of poverty in large numbers within a reasonable timeframe, and staying out? While poverty-focused MFIs agree that moving the poor out of poverty is their mission, the majority are not able to provide up-to-date, accurate and objective classifications of the poverty levels of their clients and the rate at which poor clients are crossing the poverty line.

With this kind of reliable, objective poverty information, MFIs can serve their clients more effectively, understand the outcomes of their client services and attract the funding necessary to increase the scale of their operations.

Fulfilling the Promise (English) from The Imp-Act Consortium.

Tools at Work

Historically, MFIs have used a variety of different—and sometimes interrelated—tools in attempting to determine the relative poverty level of their clients and their progress out of poverty. Some have used targeting tools, such as a House Index supplemented by a means test focused on overall asset ownership. Some use proxy measures such as loan size as a percentage of GDP per capita and the percentage of female clients to determine who they are reaching with their services. Others rely on results from infrequent comprehensive impact assessments. Finally, some rely upon the experience of field staff, in particular loan officers, as well as anecdotal evidence.

The Progress out of Poverty Index™ (PPI™)

Progress out of Poverty Index™ is designed to measure the poverty levels of groups and individuals and to track changes in poverty levels over time. The PPI is a composite of 10 easy-to-collect, country-specific, non-financial indicators such as family size, the number of children attending school and the type of housing they live in. In each country, the PPI draws information from that country’s national household survey (e.g. Mexico’s National Household Income and Expenditure Survey or Pakistan’s Integrated Household Survey), or the relevant World Bank Living Standards Measurement Survey. The PPI score then serves as a baseline from which client progress is measured. By using benchmarks and standards of measurement that produce reliable information, managers can build client profiles and track how they change over time.

In many respects, the PPI is, at its core, a consumer research tool for MFIs that is analogous to the type of consumer marketing research conducted by many retail businesses. Simply put, the results provide information the management team needs to serve clients better.