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Abstract
Development institutions and projects frequently seek to target poorer segments
of the population. Yet, existing methods for evaluating their outreach are generally
unsuited to most operational settings, since they are either too costly and cumbersome
(e.g., detailed income or household surveys), or they produce results that are not
comparable between villages or regions within a country (e.g., participatory poverty
appraisals).
This paper presents a new and operationally suitable method to measure the
poverty of clients of development projects in relation to the general population of
nonclients. The method was developed in response to demands by donors and
development practitioners for a low-cost evaluation instrument that could be used as a
regular operational tool for assessing the poverty outreach of a development project or
institution. While the method was originally developed for the purpose of assessing the
poverty outreach of microfinance institutions (MFIs), we believe the method can be used
for any development policy or project that pursues an explicit objective of reaching
poorer people.
The paper begins by discussing existing methods of poverty assessment. Next, the
paper presents heuristic steps for identifying indicators of poverty to be tested in the case
studies, including the questionnaire that was field tested in four countries with large
differences in poverty-level, socioeconomic, and cultural contexts, and with MFIs that
worked either in urban, rural, or mixed areas with different target clientele and financial products. The authors then describe the method of principal component analysis used to
construct a poverty score as the measure of relative poverty. The paper concludes with a
summary of results from four country case studies (two in Sub-Saharan Africa, one in
South Asia, and one in Central America).