Microfinance Initiatives: Progress Out of Poverty Index

Progress out of Poverty Index (PPI)

CGAP and the Ford Foundation funded Grameen Foundation USA (GFUSA) and other researchers to develop a set of poverty scorecards for countries with significant microfinance activity using techniques similar to those employed in credit scoring. The scorecards are based on statistical analysis of national household expenditure surveys and estimate the "poverty likelihood" of a person or group of persons, defined as the probability that they fall under an identified poverty line. The scorecards use a small set of simple, easily observable, and objective indicators to estimate the share of clients who are below an established poverty line. Scorecards for each country come in versions with 5, 10, and (in some countries) 15 indicators. Depending on the country, the scorecards measure the poverty likelihood relative to an absolute poverty or extreme poverty line (PPP$1/day, PPP$2/day, PPP$4/day), a national poverty line, and a national extreme poverty line (defined as the bottom 50% of those below the national poverty line or the national extreme poverty line).

The tool is named the Progress out of Poverty Index (PPI) because it can be used over time to determine improvements in client economic levels and their ultimate graduation out of poverty.

For more information, go to www.progressoutofpoverty.org.