Activity 1.

1::: Poverty Assessment Tools

Measuring Poverty Using the Progress out of Poverty Index®

The $1.9 per day international poverty line is the most commonly used measure of poverty.
International agencies use it, donors use it, and many NGOs and microfinance institutions want
to make sure their programs are reaching people below this line.
Unfortunately, determining whether a family actually lives on less than $1.9 per person per day
can be extremely challenging – it’s not as simple as asking how much they earn. To start with the
$1.9 per day line isn’t even measured in dollars, pesos or rupees. It’s measured in mysterious
economic units called “Purchasing Power Parity” (PPP) which takes into account currency
differences and exchange rates. Add to this the fact that many families grow crops or raise
animals which they eat (or barter with), and have several informal loans going simultaneously,
and you start to wonder whether it’s even possible to know if a family lives below the magic $1.9
PPP.
The Progress out of Poverty Index® – or PPI® for short – was created by the Grameen
Foundation to address exactly this problem. It uses 10 simple questions, such as ―What material is
your roof made out of?‖ or ―How many of your children are in school?‖ to determine the likelihood
that a particular household is living below the poverty line. The best part is that the tool has already
been customised
for 45 countries and can be Downloaded For free on their
website www.progressoutofpoverty.org (you Must register
first: https://www.povertyindex.org/user/register ). Translations of the tool into local languages
are also available from the website, although it took a while to find them at the very bottom of the
download page.

How does it work?

The Grameen Foundation created each of the country PPI® tools by looking at hundreds of
questions in national household surveys to see which ones were most strongly
related to poverty. The top 10 most powerful questions were selected through a combination
of statistical analysis and expert judgement, and these became the PPI® tool. Each country has a
different set of 10 questions. You may find out your country's PPI questions. These are the ones
for Cambodia:

1. How many members does the household have?

2. How many children ages 7 to 15 attend school?
3. What is the primary construction material of the outer wall of the dwelling unit occupied by
the household?
4. What type of fuel does the household mainly use for cooking?
5. What toilet facility does the household have?
6. How many bicycles and motorcycles does the household own?
7. Does the household own a bed set?
8. Does the household own a wardrobe or cabinet?
9. Does the household own a water pump?
10. Does the household own a television?

PPI questions for Nigeria

The answers for each question are multiple choice, and each answer is assigned a score. The
latest version of the PPI for Nigeria was created in July 2015 by Mark Schreiner of Microfinance
Risk Management, L.L.C. Indicators in the PPI for Nigeria are based on data from Nigeria’s
2012/13 General Household Panel Survey conducted by Nigeria's National Bureau of Statistics.
Please take note that the 2012 PPI for Nigeria is not comparable to the 2003 PPI due to
government changes in the definition of poverty. Below is Nigeria simple poverty scorecard:
The PPI® tool is a good choice when:

• You need to know how many of your program participants are below the poverty line.
• You want to select program participants based on whether or not they are below the poverty
line.
• You need to measure changes in poverty over time.
• You want to tailor parts of the program or service to an individual’s poverty level.
• You are using field staff to collect the data rather than professional data collectors.
• You have a limited amount of time to collect the data.
• You have limited statistical skills.

The PPI® tool is NOT a good choice when:

• You want to measure very small changes in poverty or living conditions for individual households.
• You are conducting quantitative research and want to use the results in complex bivariate or
multivariate statistical analysis (the limited scale makes this difficult).
• There is another official tool that you should be using based on national or donor
requirements.
• Your data collection staff have low literacy.

World Bank’s New Ways of Looking at Poverty

To better see a more complete picture of poverty, the World Bank is adding new ways of looking
at it, inspired by the recommendations from the Atkinson Commission on Global Poverty. These
new perspectives add to what we learn from the International Poverty Line (IPL, US$1.90 in 2011
Purchasing Power Parity dollars) by acknowledging three core shifts in the nature of poverty
itself: one, most of the world has become better off; two, there are other essential deprivations
besides not having money that can make someone poor; and three, poverty may fall more heavily
on some members of a household than others.

1. Poverty is also relative.

The report presents two new sets of monetary poverty lines intended to complement the $1.90
IPL. The first are higher poverty lines, fixed at US$3.20 and US$5.50 per day (in 2011 Purchasing
Power Parity dollars), reflecting typical national poverty thresholds in middle-income countries.
Although 10 percent of the world population was living on less than $1.90 per day, a quarter of
the world was living on less than $3.20 and close to a half the world was living on less than $5.50
per person per day.

In addition, the report introduces a societal poverty line that increases in value as a country
grows richer (as measured by increases in median consumption or income levels) rather than
being fixed in value. This poverty line is based on the typical value of national poverty thresholds
and differs for countries at different levels of well-being. Because the societal poverty line’s lower
bound is fixed at the $1.90 International Poverty Line, it integrates both absolute extreme
poverty and the more relative notion of ensuring that the less well-off in each society benefit as
that society grows. The societal poverty rate declined by about a third between 1990 and 2015,
dropping from approximately 45 percent to 28 percent.
2. Poverty is about more than income.

The report previews a new multidimensional poverty measure, which goes beyond
consumption or income poverty by adding non-monetary dimensions into the measure. Access to
education, health, electricity, water, sanitation, and physical and environmental security are
critical for well-being. Because many of these goods cannot be bought, they are typically not
included in the measure of extreme poverty. This work builds on the tradition pioneered by the
United Nations Development Programme and the Oxford Poverty and Human Development
Initiative with the Global Multidimensional Poverty Index, and complements it by placing the
monetary measure of well-being alongside non-monetary dimensions. Doing so helps better
understand the interaction among the various domains of poverty. The Poverty and Shared
Prosperity report combines consumption poverty with education and access to basic
infrastructure in 119 countries around 2013. At a global level, the share of the poor is 50 percent
higher when these two dimensions are added alongside monetary poverty — from 12 percent
living below the $1.90 to 18 percent deprived in at least one of the three dimensions. In addition,
more than a third of the poor suffer simultaneous deprivations in all three dimensions.

3. Poverty varies within households.

Finally, in most countries of the world, poverty is measured at the household level, which
assumes that everyone in a poor household is poor. But because there is inequality within
households, there are probably people living in poverty in non-poor households and non-poor
individuals living in poor households. Current data and methods do not permit accounting for
inequality within households in most countries, but the report examines select country studies
where this is possible and describes how this affects the global profile of poverty. The evidence
suggests that women and children are disproportionately affected by poverty, albeit with
considerable variation across countries and household types. Sex differences in poverty are
largest during the reproductive years, when care and domestic responsibilities overlap and
conflict with productive activities.

Pieced together, these new poverty lines and measures help provide a more comprehensive
picture of poverty. The more complete portrayal reinforces the positive story of the significant
progress in reducing extreme poverty. However, the new lines and measures also uncover hidden
details about the nature and extent of poverty throughout the world. Monetary poverty with
respect to the IPL will continue to be the focus of the World Bank’s work. As extreme poverty
becomes increasingly entrenched in a handful of countries and the pace of reduction continues to
decelerate, ending extreme poverty will require a redoubling of efforts and greater focus on those
countries where it is the worst.

But to truly end poverty, we now also need to think more broadly and recognize the greater
complexity of poverty around the world. The new ways of understanding poverty introduced in
the report allow us to better monitor poverty in all countries, in multiple aspects of life, and for
all individuals in every household.

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Compiled by:
Peter Katyo
Development Economist/Consultant
Dataville Research LLC