Improving the Impact of Microfinance on Poverty

Action Research Programme

Presentation to SEEP Poverty Assessment Working Group

6th May, 2004

Anton Simanowitz, Programme Manager

Imp-Act Poverty Assessment and Monitoring

• Developing systems based on needs of partners and their

stakeholders

• Strengthen internal poverty assessment & monitoring

systems

• Verify and test these systems

• Linkages to national/international poverty lines

 Examples of poverty
assessment tools

1. PRIZMA Poverty Score card – risk of being poor

1. Track client poverty status as part of the credit scoring

process

2. Locally relevant indicators are linked to national poverty

data through LSMS poverty survey

3. Data is integrated into on-going monitoring system to

allow for tracking of client status and assessment of
impact.

4. Collection of data for all clients on all loans?

 Prizma Poverty Scorecard
Very Poor 0-1 • Poor
2-4 • Vulnerable Non-Poor
5-6 • Non-Poor
7+

Indicator 0 1 2
What is the education level of
Education female HH head/spouse/partner?
≤ Primary > Primary –

Rural/Peri Urban
Residence Where does family reside? –
≤ 10,000 >10,000

Employed
What it the employment status of Unemploye
Employment Status Formal/infor –
the female HH head/spouse? d
mal

Family Size What is HH size? >5 ≤5 –

P
o On average, how often does Rarely Sometimes Often
v Meat Consumption
family consume meat? 0-2 x/wk 3-5 x/wk >6 x/wk
er W
On average, how often does
ty el Sweets
family consume sweets with
Rarely Sometimes Often
Consumption 0-2 x/wk 3-5 x/wk >6 x/wk
R l- main meal?
is b
Does family possess a color TV
k ei Household Assets None One Both
or stereo/CD player?
n
g
pr
o Transport Assets Does family possess a vehicle? None
Old New
xi >5 years ≤ 5 years

e
s
Poverty Status Score 0-12
 Examples of poverty
assessment tools

LAPO Participation form

1. Poverty screening tool with list of proxy poverty

indicators

2. Integrated into MIS system

3. Collection from 1 in 10 clients

4. Additional base-line data collected on first loan

application

(see hand out)

 Examples of poverty
assessment tools

CARD Re-means test

1. Poverty screening and monitoring tool

2. Plan to integrate into MIS

• Housing – CASHPOR house index

• Food security – FFH tool
• Education – access by school age children
• Productive assets

3. Currently indicator accuracy and sensitivity being tested

by Hugo Melgar
 Examples of poverty
assessment tools

SEF - PWR

1. Locally defined ie. not just money, therefore is

likely not to completely correlate with $/day

2. Very accurate through triangulation

3. Cost-effective and is widely applied. SEF has now

ranked in excess of 300,000 people

4. Main cost is skilled facilitators

• facilitation skills also used widely in the work of
loan officers
• staff time involved in PWR is partly or fully off-set
by the marketing impact of holding a PWR exercise
in a community.
1. Motivation

• Commitment to social mission

• Specific focus on poverty outreach and impact

• System designed to measure poverty outreach to

allow MFI to improve its depth of outreach and
prevent mission drift

• Additional monitoring component to 1) track client

changes as an organisational learning/market
research tool 2) act as an early warning system for
problems

• External reporting on absolute poverty status

Design process

1. Step One: Defining social objectives

– what to measure
Design process

Step Two: Selecting poverty indicators

• Relate to national poverty data

• Sensitive to changes – short, medium, long-

term

• Simple, reliable and consistent for MFI to

collect

• Simple, non-intrusive and quick for clients to

answer
Design process

Step Three: Testing indicators

• LAPO tested against CGAP poverty

assessment for same clients

• CARD tested using IRIS expenditure

survey

• PRIZMA – use of secondary data to

compare to LSMS

• SEF, generic testing of PWR against CGAP

poverty assessment
Design process

Step Four: Data collection and

management system

• Integrating into existing field staff

activities

• Sampling or census?

• Periodicity of data collection?

• Staff management/incentives/monitoring

• Ensuring data quality

Design process

Step Five: Data processing, analysis and

reporting

• standarisation and automation via MIS?

• analysis patterns and trends
• disaggregation
• graphs
• standard formats and additional analysis
• warning system or just reporting

Eg. PRIZMA (see powerpoint hand out)

Design process

Step Six: Using data for management

• Reporting on poverty outreach

• Monitoring changes in poverty outreach

• Disaggregation by Branch, loan officer,

product etc

• Using data as early warning system

Use of system

Eg. SEF

• Quarterly view of poverty levels of new

clients (disaggregated by Branch)

• Quarterly view of poverty level of drop-

outs (and rates disaggregated by no. of
variables – Branch, loan officer, business
type, loan amounts etc

• Vulnerable centre early warning system

(savings, attendance, arrears -> drop-
out)
Use of system

Eg. PRIZMA
• HR – staff commitment to social
performance
• Market segmentation
• Drop-out link to poverty status
• Products and services – better client
understanding
• Competitiveness – better promotion to
targeted clients and retention
• Improving Efficiency – link to activity
based costing and understanding cost
structure
PAWG Questions: Time and cost

Development costs for pioneers eg. PRIZMA

senior staff Prizma MFC MFC
frontline TA analyst
staff

1. Agree Rationale 5 4

2. Identify data sources 5 0

3. Develop indicator pool 7 4
4. Narrow pool to select few 2 2 3
5. Define measures and ranges 2 0 6 22
6. Develop simple scorecard 2 0 8 12
7. Develop cut-off points for 2 0 6 12
categories
8. Determine frequency of collection 1 2 1
9. Develop reporting formats 2 0
10. Determine means of quality 3 4
control
TOTAL 31 16 24 46
PAWG Questions: Time and cost

Start-up costs for replicants?

Running costs
eg. PRIZMA, LAPO – virtually cost-less data
collection

• some additional costs for data analysis

and reporting
 PAWG Questions: Time and cost
SEF cost-effectiveness study
Table 1: Costs of impact management activity at SEF
Cost item Monthly Annual
Start-up costs (1) – $1 690
Development department (2) $384 $4 611
Photocopies of forms $26 $308
Capture client information $227 $2 720
Update client records $96 $1 154
Branch Manager data capture $26 $314
Fieldworker Training $700 $8 400
Branch Manager training/workshops $192 $2 308
Zonal assistants training/workshops $77 $923
Workshop overhead costs – $615
TOTALS $1 728 $21 353
 PAWG Questions: Time and cost

SEF cost-effectiveness study – value of

information
Table 1: Return to SEF impact management investment, 06/02-12/03
Rate of return to
TCP Interest income/
Amount impact management
impact management costs
investment
Income above hypothetical May 2002 ‘stagnation’ level $369 350 1153%
Income from improved client retention $118 333 369%
Imputed income from programme growth $251 017 784%
Cost of impact management during the period $32 029 –
PAWG Questions: Time and cost

“SEF’s experience shows that although

impact monitoring costs money to do, it is
a case of either spending money to
anticipate problems or spending money to
fix them afterwards. In this respect,
impact monitoring should be understood
in terms of opportunity cost. Preliminary
indications are that impact monitoring is
overwhelmingly cost effective when
considered in these terms.” (Ted Bauman,
April 2004)
PAWG Questions: Mis-reporting and data
manipulation

• Is this specific to poverty assessment or

all research?
• Where time pressure is a problem is an
issue – LAPO, SEF, SAT
• Fitting into existing activities – danger of
linking to loan application process
• Interviewing own clients or not –
potential problem
• Monitoring/triangulation – key
management task is spot-checking
• Appropriate questions and positioning
PAWG Questions: Mis-reporting and data
manipulation

• PRIZMA – internal auditing

• LAPO – spot checking

• key is that this is seen as core part of

operations
Improving the Impact of Microfinance on Poverty

Action Research Programme

www.Imp-Act.org
www.microfinancegateway.org/impact