Overcoming the Obstacles of Identifying the Poorest Families

This paper looks at means to identify poorest and neediest microfinance clients illustrated with a South African case study. The authors argue that active poverty-targeting is needed. Poverty targeting can assist by raising awareness of the different needs of different types of clients and allowing for different products to be effectively targeted.

• The CASHPOR House Index (CHI), uses external housing conditions as a proxy for poverty, and can be very effective in conditions where there is a consistent relationship between poverty and housing conditions;
• Participatory Wealth Ranking (PWR), uses a community's own definitions and perceptions of poverty, and employs rigorous cross checking methods to ensure consistency and accuracy of results;
• Both methods aim to build on existing information, collect the minimum data necessary for reliable targeting, and follow-up targeting with a motivation process to encourage the poorest to join the programme;
• They are context specific:
  • PWR relies on detailed knowledge of a community of itself, and is unlikely to work in contexts where the community is weak, or where there are high levels of conflict or mistrust;
  • Similarly, the CHI relies on there being a strong correlation between housing conditions and poverty. This is not a universal relationship and is very much defined by the context. Where the CHI is adapted to local conditions, perhaps even including other externally visible, non-housing indicators, there is a greater chance of the Index being applicable to a wider range of contexts.

These methods must not be applied blindly but adapted to local needs and conditions. A number of choices need to be made which will determine which tool is used.

[Adapted from the authors' abstract]