Scoring Change: Prizma's Approach to Assessing Poverty

This paper describes the features of a poverty assessment system developed by Prizma with Microfinance Centre for Central and Eastern Europe and the Newly Independent States under the Imp-Act program. This system is referred to as a poverty scorecard.

The paper observes that the main purpose of this system is to measure the level of poverty of the Prizma clients and to monitor the changes over time. It focuses on the characteristics and the development process of the poverty scorecard, detailing its benefits and costs. The paper details the following aspects of the scorecard:

• It is a composite measure of household poverty based on non-income indicators, proxies for poverty;
• Its capacity to gauge poverty status is credible, and is appropriate for measuring poverty status of clients of any financial or non-financial service organization;
• Its design complements market research and can be incorporated in the already existing institutional design;
• The costs incurred to develop it are outweighed by the benefits that the development process and the tool have yielded.

The paper provides a detailed frame work for designing the system. Some of the important steps include:

• Identifying the data sources;
• Recognizing the indicators correlated with poverty;
• Testing a variety of scorecard combinations to identify the strongest predictive power;
• Determining the means and frequency of collecting data with least bias and error.

The paper concludes that:

• The capacity of the scorecard to gauge poverty is credible and it enables the institution to better meet developmental imperatives;
• However, data quality must be ensured and institutionalization of the system must be carried out for further improvement of the scorecard.