Assessing the Relative Poverty Level in Clients of Microfinance Institutions: An Operational Tool

This policy brief summarizes the main features of a low cost operational tool designed to measure the poverty level of MFI clients relative to non-clients. The brief explains how the tool can be applied and what type of results can be obtained.

The brief discusses:

• Purpose, advantages and method of development;
• Indicators used in the generic household-level questionnaire (300 poverty indicators were used in the questionnaire and tested in four country case studies);
• Household poverty index and its calculation;
• Manual that guides evaluators in applying the field research tool and in estimating the poverty index.

The brief recommends that:

• An MFI's relative poverty outreach should be assessed in the context of regional poverty within a country;
• The country's poverty level should be compared to those of other developing countries, in order to assess the MFI's poverty outreach on an international scale.

The brief concludes that:

• Case studies have shown that the tool is useful and sufficiently simple for evaluating the poverty outreach of MFIs in an operational context;
• Four MFIs differ not only in terms of poverty outreach, but also in their mission, the type of markets they seek, their preference for a specific type of institutional culture, etc.;
• Poverty assessment results have to be interpreted in light of these considerations.