Measuring Poverty of Microfinance Clients in Haiti
This paper describes the process that Fonkoze, a microfinance institution in Haiti, used to build a poverty scorecard to benchmark existing client data to the $1-a-day extreme poverty line.
The paper describes the following steps that Fonkoze took to develop the scorecard:
- By referring to data from a national survey of household income, Fonkoze identified 12 variables as suitable indicators of whether a household is above or below the extreme poverty line;
- It constructed a scorecard, allocating a number of points to each household depending on their responses to these 12 questions;
- It then translated the total score into a probability that each household lies above or below the poverty line;
- It used this scorecard to analyze poverty rates of clients across several Fonkoze branches and credit cycles.
The paper states that this approach:
- Allowed Fonkoze to use existing data to produce quantitative estimates of the level of extreme poverty among its clients;
- Helped the MFI to compare the poverty outreach of its various branches.
The paper concludes that a poverty scorecard makes estimation of a sophisticated piece of information a household's poverty status a matter of asking a few simple questions.