Integrating Poverty Assessment into Client Assessment

This note argues that microfinance institutions (MFIs) can improve performance by collecting and analyzing information about the poverty level of their clients. It states that comparing poverty measures with other client assessment information leads to better marketing, targeting and assessment of financial products.

The paper states that:

• 50% of the aid granted by the United States Agency for International Development (USAID) for microfinance is targeted to the very poor;
• USAID needs to develop tools for assessing the poverty levels of current or prospective microfinance clients;
• Organizations applying to USAID for micro-enterprise assistance will have to demonstrate their poverty outreach using one of the certified poverty assessment tools;
• For MFIs with a mission of poverty alleviation, poverty assessment constitutes sound microfinance practice;
• MFIs can use information about the client's poverty status to target, screen and assess clients.

The paper:

• Suggests two methods by which MFIs can collect data about the poverty status of their clients;
• Offers examples to illustrate these methods;
• Lists challenges in integrating poverty assessment within a broader system of client assessment.
• Provides examples of MFIs that have successfully integrated poverty assessment with client assessment.

It concludes that integrating poverty assessment with client assessment takes organizational commitment, money, careful planning and implementation. Therefore, it recommends that MFIs that decide to undertake this task begin with a simple system and increase the system's complexity over time.