Progress Out of Poverty Index ™

1. Progress Out of Poverty Index™

2. What is the PPI? An objective client poverty assessment and targeting tool, which: • Provides social performance data • Enables MFIs to manage social performance An inexpensive and easy to collect scorecard • Derived from representative national household income and expenditure surveys • Comprised of simple, non-financial indicators

3. Asia Philippines Pakistan Bangladesh India Indonesia Vietnam Nepal Coming 2009-2010 Cambodia China Sri Lanka Sub Saharan Africa Nigeria Kenya Malawi Mali Ethiopia Senegal South Africa Coming 2009-2010 Tanzania Uganda Ghana Rwanda Cameroon Namibia Global Rollout of the PPI • Middle East/ North Africa • Palestine • Morocco – on hold • Yemen • Coming 2009-2010: • Tunisia • Egypt • Syria • Jordan • Latin America • Mexico • Haiti • Bolivia • Peru • Ecuador • Coming 2009-2010 • Colombia • Nicaragua • Honduras • Dominican Republic • El Salvador • Guatemala

4. The PPI in Context

5. The Reason for SPM

6. The Reason for SPM

7. Objectives of PPI Use • Understand poverty levels of clients… • …And change in those levels • Measure outreach • Use poverty level data to improve products and services “…to measure the achievement of the social goals as in the mission statement and to design and deliver better products and services to our clients.”

8. What can the PPI do for MFI management? • Inform management decisions about processes, programs, products, and provision of services • Target clients for specific products and services • Help in responding to competitive pressures, by understanding the balance of financial and social returns • Market to investors with a social bottom line

9. What can the PPI do for the Industry? • Allow investors to better target investments • Better, more transparent segmentation of the microfinance market • Reliably demonstrate poverty outreach • Provide timely and accurate social performance information to regulatory bodies, social investors, donors, and rating agencies

10. What is the PPI?

11. Construction of the PPI All indicators on the national household survey are ranked according to how strongly they predict poverty levels. The full list of 400-1000 indicators is narrowed to the 100 most powerful ones. National Survey 100 indicators Using both statistics and expert judgment, a 10 indicator scorecard is constructed. 10 indicators PPI Each possible response is assigned point value based on the original national survey responses. The total score (summing from 0 to 100) is then linked to probabilities of falling above or below the poverty lines.

12. What does the PPI look like? SAMPLE

13. PPI in Action

14. PPI Fundamentals: Basic use Indicators Client Response Points 8 0

15. PPI Fundamentals: PPI score 8 0 5 2 0 0 0 0 0 9 24

16. PPI Fundamentals: Poverty likelihood The client interviewed has a 54% likelihood of falling below the national poverty line and a 46% likelihood of being above it. PPI score of 24 Poverty Likelihood

17. PPI Fundamentals: Portfolio analysis • For example, an MFI has 3,000 clients • 800 clients have scores of 10 • 1,000 clients have scores of 30 • 1,200 clients have scores of 50 Poverty Likelihood

18. The PPI Fundamentals: Portfolio analysis The poverty distribution for the MFI of 3,000 clients is: [(800*66%) + (1,000*44%) + (1,200*27%)] 3,000 = 43% or 1292 of the 3,000 clients are below the national poverty line Poverty distribution of the MFI portfolio Average of the individual poverty likelihood percentages =

19. The PPI Fundamentals: Portfolio analysis • Tracking changes over time • Suppose the same group of clients, from the previous example, is re-tested one year later and the portfolio likelihood is 35% below the national poverty line.

20. How are PPI data used?

21. PPI Case Study: NWTF • Negros Women for Tomorrow (NWTF) in the Philippines • Integrated the PPI collection across all branches after piloting two years ago • Collected information on additional indicators to use as it refines its outreach and its products and services • Compared data by branch to understand what products and services are most effective • Outcomes • Changed its eligibility requirements for incoming clients by targeting 10 percent of clients above the poverty line • Facilitated entry for the poorest clients by adjusting loan size, loan cycle period and possible pre-payment options

22. PPI Case Study: NWTF NWTF results from a census PPI implementation

23. PPI Case Study: Fonkoze • Products tailored for clients at different levels means there is a need to differentiate those clients • Collect PPI as part of “Evaluation Card” from all clients • Use “Social Impact Monitors” to track 20% of clients over time • Outcomes • Clear poverty level distinctions for each product type. • Ability to track client poverty level changes over time. • Improve product design and targeting to serve its clients better.

24. PPI Case Study: K-Rep Pilot Project PPI has assisted K-Rep in: • monitoring changes in client poverty levels for purposes of management  decision making and reporting; • identification and development of innovative products and services which target specific market nitches; • understanding of clients’ socio economic conditions before, during and after our credit intervention and how well K-Rep is achieving its social goals of reducing poverty, reaching the poor and the vulnerable and in promoting community development 24

25. PPI Summary • Easy-to-use, inexpensive, transparent, objective • Estimate likelihood that a household is poor: • Use policy cut-offs for targeting • Take average to get portfolio poverty rate • Track over time for progress out of poverty • Practicality and accuracy • One page, few indicators, simple weights • Field workers can compute scores on paper in real time (no software required) • Valid for any program serving the poor, not just microfinance

26. Progress Out of Poverty Website