The development and update of every PPI is coordinated by IPA and includes the input of a variety of stakeholders. IPA usually tests a PPI in the field and creates supporting documentation in the interest of transparency.
The questions, responses, and weights on the PPI scorecard and look-up table are derived from each country’s most recent national household expenditure or income survey. These surveys typically contain 200 to 1000 questions. Of these, ten questions are derived for the PPI scorecard, based on a balance of the following criteria:
- The question has a strong correlation with poverty, i.e. there is statistical significance that households who answered the question a certain way are below the poverty line.
Example: “What is the level of education attained by the head of the household?”
- The question is inexpensive to collect, easy to answer quickly, and simple to verify.
Example: “Of what material is the roof of the residence made?”
- The question is liable to change over time as poverty level changes.
Example: “Does the household own a motorbike or car?”
After the scorecard questions are selected, the scoring system is developed so that the lowest possible score is 0 (most likely poor) and the highest is 100 (least likely poor). Each PPI scorecard is published with a Design Documentation Memo. Read this document for your country’s PPI for a detailed account of how the PPI was made and why it is statistically sound.
Each new PPI is tested in the field for accuracy and ease of use. IPA documents the outcomes of the testing process. Those documents can be found on the PPI by Country pages.
The History of the PPI
In 2005, Grameen Foundation commissioned the development of the Progress out of Poverty Index® (PPI®) with the support of the Consultative Group to Assist the Poor (CGAP) and Ford Foundation. Their goal was to create an easy-to-use poverty measurement tool for microfinance institutions, understanding that these institutions need reliable poverty data to manage their social performance.
Mark Schreiner’s simple poverty scorecard resonated with Grameen Foundation because of the characteristics it shares with the Grameen Bank's 10-Point System. The Prizma Microfinance (Bosnia) scorecard also inspired the development of the PPI. After field-testing the PPI, the foundation instituted a training program for MFIs interested in testing the PPI.
Today, the PPI has proven its reliability and feasibility to many microfinance professionals. Armed with client poverty data, these professionals are now making more informed decisions and assessments. IPA is actively promoting the PPI to organizations outside of the microfinance industry who can benefit in the same way: NGOs, social enterprises, social investors, healthcare providers, and more.