Poverty Assessment Tools

Poverty assessment tools are one type of client assessment tool. MFIs that have a mission and goals to target poor clients must measure the poverty of incoming clients. Similarly, those MFIs with the goal of reducing poverty among clients must measure change in client poverty. Without quantitatively measuring poverty, an institution is either assuming it is achieving its goal, or its progress is unknown. Using poverty assessment tools, an MFI can:

  • Measure the relative or absolute poverty level of clients
  • Profile clients at entry and exit
  • Track changes over time
  • Use data to target & place clients into programs

Absolute Poverty Assessment Tools define a client's poverty in terms of a currency amount, most commonly, by measuring client poverty in relation to the international poverty lines established by the World Bank (currently poverty lines are $1.25/day, which describes the extreme poor, and $2.50/day which describes the poor). Two widely-used absolute poverty assessment tools are:

Relative Poverty Assessment Tools measure a client's poverty in relation to other clients or the surrounding community, and do notdefine a client's poverty as a currency amount (such as $1.25/day). Participatory wealth ranking is an example of a relative poverty assessment tool.