Top 10 PPI Challenges: Barriers Faced by MFIs

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January 24, 2011

Muhammad Awais is a guest blogger and the Regional Microfinance  Programme Specialist for Plan International in Asia.  Awais focuses on helping integrate social-performance metrics into Plan International’s work. He brings a great perspective as a microfinance institution (MFI) practitioner as well as someone who knows, at the network level, how to integrate SPM tools like the Progress out of Poverty Index (PPI) into operations. He is based in Bangkok.

As the Regional Microfinance Programme Specialist for Plan International in Asia, I have learned first-hand the top challenges faced by microfinance institutions in accepting — and implementing — the PPI as their poverty assessment tool. My observations led me to create the 10 challenges I outline here.

  1. Simplicity is difficult to accept. For some people it’s difficult to accept simple solutions. The PPI, as a simple-to-use tool, raises some barriers that make its acceptance difficult.
  2. Can poverty be measured with only 10 questions? A lot of people have asked this question. The PPI uses 10 non-financial, verifiable indicators to measure poverty. These are proxy indicators, with attached values and a poverty look-up table to score those values — i.e., to measure the likelihood of poverty that each score indicates. In summary, the PPI consists of 10 proxy indicators with scores attached to values measured by poverty likelihood tables. So the PPI is NOT just 10 questions.
  3. Gaps between PPI results and the results from an MFI’s own poverty-measurement tool raise questions. MFIs can be surprised to see the gap between PPI results and the results from their own poverty measurement tool. The PPI measures poverty for different poverty lines — e.g. national poverty line, food poverty line, US$1.25/day PPP (purchasing power parity), etc.  Before an MFI compares PPI results with the results of its tool, it must find out where its poverty tool fits in terms of poverty line(s). Does the MFI’s poverty tool measure poverty for the national poverty line or the US$1.25/day PPP? You need to compare apples with apples.

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I think your observations was quite well to point out Progress out of Poverty Index (PPI). I think its really hart then we say to remove poverty. But not impossible.

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