Thursday, January 28, 2010

The Progress Out Of Povery Index

So how would one measure the “social bottom line” of an enterprise that is dedicated to assisting the poor in raising themselves out of poverty? As described on the Progress out of Poverty web site, Grameen Foundation has spent considerable effort and resources addressing this question and, as a result, developed country specific indices (PPI) for about 30 countries that measure the relative poverty level of individuals and households at a particular point in time. Using this tool social investors and entrepreneurs can be assured that a social enterprise is indeed targeting the poor with its programs and the social impact of these programs can be measured over time.
The indices are derived from large, current national income or national expenditure surveys conducted by census bureaux or the World Bank. These surveys contain up to 1000 data points which are consolidated into about 100 discreet categories such as size of household, education levels, dwelling characteristics, durable goods ownership etc. These are then subject to regression analysis to produce 10-12 simple questions which predict with a high degree of probability an individual’s or household’s likelihood of having a specific income level.
PT Ruma is using the PPI for Indonesia to identify potential poor entrepreneurs to train and deploy as Village Phone Operators (VPOs). Yenni, the young lady pictured in an earlier post, has a PPI score of 46. According to the PPI Index for Indonesia, this means that her household is 80% likely to be living below a daily per capita income of $2.50. The money she earns as a VPO therefore, makes a significant contribution to her household’s well being. Perhaps this may mean that her little sister, seen kneeling beside her, will one day have the opportunity to finish high school.
Below are the 10 questions used to determine a potential VPO’s PPI score and likely income level:
1. How many members does the household have?
2. How many household members aged 5 to 18 are currently attending school?
3. In the past week, how many household members ages 11or older worked or had a job/work/business?
4. What is the main source of drinking water of the household?
5. What type of toilet does the household have?
6. What is the household’s main flooring material?
7. What is the household’s main ceiling material?
8. Does the household own a refrigerator?
9. Does the household own a motorcycle?
10. Does the household own a television?

1 comment:

  1. Great explanation, Daniel. Great post.
    If anyone wants to read more about PPI, it's here.