1. Progress out of Poverty Index
December 2007
Progress Out of Poverty Index™
Grameen Foundation

2. Progress out of Poverty Index
December 2007
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
An objective client poverty assessment and targeting tool, which can be used to measure client poverty levels and influence management decisions
- Provides social performance data
Likelihood an individual or portfolio falls above or below poverty lines ($1/day/PPP, $2/day/PPP and/or the national poverty line)
- Enables MFIs to manage performance
by understanding their clients’ poverty status
An inexpensive and easy to collect scorecard
Derived from the most recent representative national household income/expenditure surveys
Comprised of simple, non-financial indicators.
Household and housing characteristics (such as cooking fuel and type of floor)
Individual characteristics (such as age and highest grade completed)
Household durable goods (such as electric fans and telephones)
Strongly Correlated with Poverty
Likely to Change over time with change in poverty status
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3. Global Rollout of the PPI
Progress out of Poverty Index
December 2007
Global Rollout of the PPI
Middle East/ North Africa
Palestine
Morocco – on hold
Yemen
Coming :
Tunisia
Egypt
Syria
Jordan
Latin America
Mexico
Haiti
Bolivia
Peru
Ecuador
Coming
Colombia
Nicaragua
Honduras
Dominican Republic
El Salvador
Guatemala
Asia
Philippines
Pakistan
Bangladesh
India
Indonesia
Vietnam
Nepal
Coming
Cambodia
China
Sri Lanka
Sub Saharan Africa
Nigeria
Kenya
Malawi
Mali
Ethiopia
Senegal
South Africa
Tanzania
Uganda
Ghana
Rwanda
Cameroon
Namibia
Many other organizations are piloting and implementing the PPI around the world. We are also speaking with social investors (like Oikocredit), social raters (Microfinanzas, M-CRIL/Micorate, Planet Rating will incorporate data into social ratings), national/regional networks (MENA, Asia, and Latin America), government institutions (USAID, NRSP in Pakistan), CGAP, and large funders (Ford Foundation) are part of the wide variety of PPI supports.
Grameen Foundation

4. Progress out of Poverty Index
December 2007
The PPI in Context
Grameen Foundation

5. Progress out of Poverty Index
December 2007
The Reason for SPM
SPM
Information Needs
Tools/
Process
Improve Products/ Design
Achieving Mission
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6. Progress out of Poverty Index
December 2007
The Reason for SPM
Serving Poor Better
Better Information
Better Decisions
More Accountability
Better Management
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7. Progress out of Poverty Index
December 2007
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.”
Grameen Foundation

8. What can the PPI do for MFI management?
Progress out of Poverty Index
December 2007
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
-Identify the poverty level of clients within certain programs. An organization can also identify the poverty levels of clients leaving programs.
-To target clients an organization can set cut off PPI score.
-Being transparent both financially and socially.
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9. What can the PPI do for the Industry?
Progress out of Poverty Index
December 2007
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
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10. Progress out of Poverty Index
December 2007
What is the PPI?
Grameen Foundation

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 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.
First step, uncertainty coeficient.
Logit regression to build the scorecard.
After all indicators are tested, each indicator is selected based on several factors. The factors that contribute to the indicator selection include the: (used when conducting expert judgment process)
- Ability to improve accuracy
- Likelihood of acceptance by users (determined by simplicity, cost of collection, and “face validity” in terms of experience, theory, and common sense)
- Ability to change values as poverty status changes over time
Capacity to contribute to question variety (in comparison with other indicators already in the PPI)
- Ease of observation/verification
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?
Progress out of Poverty Index
December 2007
What does the PPI look like?
SAMPLE
The scorecard is simple an easy to read. The indicators are on the left, answers and assigned values in the middle and the responses are totaled on the right. Simple and intuitive.
Organizations can attach the PPI to a loan application or the exit interview process
Source: Microfinance Risk Management, L.L.C. based on Schedule 1.0 of Round 62 (July 2005 to June 2006) of India's Socio-Economic Survey (SES) conducted by the National Sample Survey Organisation (NSSO, 2005).
Can be used with or without the numeric weights
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13. Progress out of Poverty Index
December 2007
PPI in Action
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14. PPI Fundamentals: Basic use
Progress out of Poverty Index
December 2007
PPI Fundamentals: Basic use
Indicators
Client Response
Points 8
Indicators are listed on the left. Questions are asked precisely as written and answered by the client. Once staff receives an answer they circle the response and place the corresponding value/points in the right hand column.
Grameen Foundation

15. PPI Fundamentals: PPI score
Progress out of Poverty Index
December 2007
PPI Fundamentals: PPI score 8 5 2
The PPI score can be used for targeting purposes and to determine the poverty likelihood. It is important to understand that the PPI score of 27 does not mean the poverty likelihood is 37.5% ($1/Day/PPP). The score is applied to a simple look up table to determine the poverty likelihood level of the client. 9 24
Grameen Foundation

16. PPI Fundamentals: Poverty likelihood
Progress out of Poverty Index
December 2007
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
Grameen Foundation

17. PPI Fundamentals: Portfolio analysis
Progress out of Poverty Index
December 2007
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
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18. The PPI Fundamentals: Portfolio analysis
Progress out of Poverty Index
December 2007
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
We will cover change over time during our analysis discussion.
Poverty distribution of the MFI portfolio
Average of the individual poverty likelihood percentages =
Grameen Foundation

19. The PPI Fundamentals: Portfolio analysis
Progress out of Poverty Index
December 2007
The PPI Fundamentals: Portfolio analysis
Total Clients
3,000
Year 1
Year 2
43%
35%
Portfolio Poverty Distribution
1292
1050
# Clients Below the Poverty Line 8%
Change in Poverty Distribution (%)
242
# Clients Cross the Poverty Line
19%
Change in Poverty Levels (%)
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.
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20. Progress out of Poverty Index
December 2007
How are PPI data used?
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21. Progress out of Poverty Index
December 2007
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
NWTF results for their pilot implementation.
Other indicators: age, type of business, number of entrepreneurial activities, rural or urban setting
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22. Progress out of Poverty Index
December 2007
PPI Case Study: NWTF
NWTF results from a census PPI implementation
NWTF results for their pilot implementation.
Grameen Foundation

23. PPI Case Study: Fonkoze
Progress out of Poverty Index
December 2007
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.
NWTF results for their pilot implementation.
Other indicators: age, type of business, number of entrepreneurial activities, rural or urban setting
Grameen Foundation

24. PPI Case Study: K-Rep Pilot Project
Progress out of Poverty Index
December 2007
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
NWTF results for their pilot implementation.
Other indicators: age, type of business, number of entrepreneurial activities, rural or urban setting 24
Grameen Foundation 24

25. Progress out of Poverty Index
December 2007
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
Grameen Foundation

26. Progress Out of Poverty Website
Progress out of Poverty Index
December 2007
Progress Out of Poverty Website
Grameen Foundation