Using the Poverty Probability Index, VisionFund has an objective measure of the poverty levels of our clients and tracks changes to poverty levels over time. In addition, through regular surveys of clients, we understand precisely how our work affects their lives, which enables us to understand how we can continuously broaden and deepen our impact.
Poverty Probability Index
VisionFund and World Vision are among biggest users and contributors to the Poverty Probability Index (PPI) in the world. At VisionFund, our loan officers ask our clients the 10 PPI questions every loan cycle, which help us determine whether we’re targeting the vulnerable households that need our services the most year after year. Using the PPI, we’re able to determine the likelihood of a client’s level of poverty relative to the national poverty line, or an international standard, such as “extreme poverty” of $1.90 per day. With this understanding of families’ poverty, we can develop and provide the right products and services t to break the cycle of poverty, freeing children of suffering for years to come. By asking the same clients the PPI questions over time, we can see our clients move out of poverty and into self-sustaining livelihoods.
“We conclude PPI accurately distinguishes poor from non-poor households.”
-Desiere, Sam & Vellema, Wytse & D'Haese, Marijke. (2014). A validity assessment of the Progress out of Poverty Index (PPI)™. Evaluation and program planning. 49C. 10-18.
Poverty Probability Index
The Poverty Probability Index (PPI®) is a poverty measurement tool for organisations and businesses with a mission to serve the poor. The PPI is statistically-sound, yet simple to use: the answers to 10 questions about a household’s characteristics and asset ownership are scored to compute the likelihood that the household is living below the poverty line. With the PPI, organizations can identify the clients, customers, or employees who are most likely to be poor, integrating objective poverty data into their assessments and strategic decision-making.
Why targeting matters
Appropriate targeting of clients is the key to VisionFund’s mission to see life in all its fullness for every child. Microfinance helps to build resilience by supplying the financial tools and information that underpin sustainable livelihoods. Regular income from these livelihoods means that families are able to thrive and to increase their assets and savings. The Poverty Probability Index helps us to gauge whether we are working with communities who most need our services and are central to our mission, and whether our work is contributing to the improved resilience of individual families.
People living in poverty are vulnerable to small changes in consumption behaviours, such as amount and quality of food, or availability of soap and hygiene products. VisionFund prioritises microfinance services for vulnerable households to help them manage these daily risks - supporting their micro-businesses today, in order to save for tomorrow. For example, in remote agricultural communities, income peaks at harvest time and is negligible during the “hungry season”. Having the capital to be able to diversify income sources during low seasons or be more profitable in harvest seasons is important to ensure families can consistently pay for their basic household needs, no matter what the season.
Read More About Microfinance
For over 15 years, VisionFund has focused on delivering quality microfinance products that promote financial inclusion in rural areas, particularly for people living in poverty.