Microfinance is designed to improve the lives of very poor people. That goal, often called a “social” bottom line, is an important measure for microfinance programs, but is hard to gauge. Grameen Foundation has long recognized the need to develop a practical and accurate tool to measure social performance, just as there are financial tools to measure financial performance.
Our search for an innovative solution for the microfinance industry lead us to develop the Progress Out Of Poverty Index™ (PPI™) as an easy to use, flexible tool that is easily customized for a particular country. It is a unique composite of ten easy-to-collect, country-specific, non-financial indicators such as family size, the number of children attending school, the type of housing, and access to drinking water. This country-specific PPI then serves as a baseline from which client movement out of poverty is measured. By using benchmarks and standards of measurement that produce reliable information, managers can build client profiles and track how they change over time. This tool is fast becoming an industry standard.
In addition to tracking a client’s progress, PPIs help microfinance institutions (MFIs):
- Identify and select new microfinance clients
- Understand what products and services meet its clients’ needs
- Evaluate and change its programs to increase their impact
The PPI, when combined with measures of financial condition of the MFI, produces a “double bottom line”. The double bottom line is important to socially responsible investors who support microfinance. It enables investors and funders to see that their investments are being managed well and that people are truly moving out of poverty.
Currently, there are 36 countries with PPIs in four regions: Asia, Latin America, Middle East and Africa. Grameen Foundation is at work training MFIs and networks worldwide in the use of the PPI, and helping them to determine how to use the valuable data that results.
Grameen Foundation publishes a Progress Out of Poverty Index™ Series of case studies that describes the experiences of MFIs using the PPI in different ways.
In the Philippines, MFI Negros Women for Tomorrow (NWTF) learned through PPI data that it was not serving the percentage of poor its mission sought to reach. NWTF used this information to refocus its outreach efforts and increase the number of poor borrowers like this client who operates a small street business.