ACCION’s Poverty Assessments Framework

1. ACCION’s Poverty Assessments Framework

2. Overview • Multipart Poverty Assessment Project • First phase involves analysis of MIS systems data of several partner and comparison of that data against national household survey data • The later phases carry out additional survey research and qualitative studies • The final aim is to incorporate findings on client profiles into ACCION’s market to reach farther downmarket.

3. Phase 1: Objectives • Objectives: Key Questions • How does poverty distribution of ACCION affiliates clients compare with the poverty distribution of the country’s overall population? • How do demographic and socio-economic characteristics of ACCION affiliates clients compare with the overall population> • What are the borrowing patterns of poorer clients? How are loan size, amount, loan maturity, number of previous loans, and repayment status related to poverty level?

4. Phase 1: Sample • The following institutions are included in the research: • BancoSol (Bolivia) • Banco Solidario (Ecuador) • Genesis (Guatemala) • Mibanco (Peru) • Sogesol (Haiti)

5. Poverty Assessment Indicators • Most common methods of measuring poverty: • “Standard of Living” • Consumption is a proxy for welfare • Healthcare • Educataion • Housing • Measuring welfare directly • Some factors • Health outcomes • Educational Attainmement • Quality of Housing • Broader Definition of Poverty: Add on social empowerment and political freedom (Sen and Narayan)

6. Poverty Assessment Indicators • ACCION’s Plan • Use the “standard of living” measurement • Measure consumption • Income • Expenditure • May collect qualitative information later on… • Two other frameworks have been used: • CGAP Model • USAID AIMS Project

7. Poverty Assessment Indicators • CGAP Model • Calculate “poverty index” • Variables: Household demographics, economic activities, clothing, food security, housing, assets • Component Analysis Principle • Weighs individual components based on which are most effective in predicting poverty in a given AREA • Measures poverty in a relative rather than absolute basis. • National Population is divided in thirds based on household poverty index scores, and MFI poverty scores are compares to these three income groups

8. Poverty Assessment Indicators • CGAP Model • Pros • Multiple measures of poverty into single indicator • Uniquely based on local conditions and local poverty inicators • Cons • Relative measurement. So it does not allow for cross-regional or cross-country analysis.

9. AIMS method • Focuses specifically on how microfinance services interact in the lives of the clients • Surveying overall impact • Clients Use of Loans • Profitability • Savings • Client Satisfaction • Empoerment • Household is the center of the analysis

10. AIMS method • Focuses specifically on how microfinance services interact in the lives of the clients • Surveying overall impact • Clients Use of Loans • Profitability • Savings • Client Satisfaction • Empoerment • Household is the center of the analysis • Focuses on the impact of microfinance • ACCION’s framework focuses on the poverty level of clients relative to the overall population

11. Poverty Lines • Poverty Lines • Distinguish between “poor” and “non-poor” by testing individuals ability to purchase basic food and non-food necessities. • May be absolute or relative • Absolute: Represent real fixed costs of a set of basic food and non-food goods • Relative: Change over time and are based on median income or expenditure • Relative poverty lines are more common in developed world. • Ergo, Accion uses absolute poverty lines

12. Poverty Lines • Calculating Poverty Lines • “Cost of Basic Needs” Approach • Food Stuffs • Represent the real cost of a consumption basket (bucket) unique to a country/region • For example, in Honduras, there would be a lot of beans in the consumption basket. • Basket is then priced using the market prices of the goods in the basket • Non-Food Necessities • Based on survey data (no itemized buckets/baskets) • Uses broad assumptions about the percentage of a poor household’s expenditure represented by necessities.

13. Poverty Lines • Using Poverty Lines • Once established, they are often fixed for several years at a time and adjusted for inflation. • Updated survey data is used to calculate the poverty level based on houshold income or expenditures and assessing whether it is sufficient to afford consumption basket • Poverty lines are calculated by entities such as: • Governments • World Bank’s Living Standard Measurement Study (LSMS) • United Nations • Inter-American Development Bank • They are most useful for within-country comparisons, since the food basket is country specific.

14. Poverty Lines • International Poverty Line • The World Bank created an IPL in its 1990 World Development Report. • Has gained popular/political recognition • Based on a fixed basket that is not unique to specific countries • Then, uses purchasing power parity to calculate the poverty line in several countries • The IPL is the median of the 10 poorest countries • Big Problem: Does not measure changes in baskets of goods across countries

15. Poverty Lines • International Poverty Line • The World Bank created an IPL in its 1990 World Development Report. • Has gained popular/political recognition • Based on a fixed basket that is not unique to specific countries but is a “basket of commodities that is roughly similar across the world” • Then, uses purchasing power parity to calculate the poverty line in several countries • The IPL is the median of the 10 poorest countries • Big Problem: Does not measure changes in baskets of goods across countries. • Does not take into account economic and social conditions that are unique to individual countries • World Bank recommends using country specific poverty lines

16. Poverty Indicators • Poverty Indicators: Tools to measure poverty in reference to poverty lines. • Because poverty lines are consumption based, the most common “standard of living” indicators are expenditure and income (adjusted for savings). • These are proxies for consumption. • Expenditure is usually preferred poverty indicator. • Not as volatile as income due to seasonality of income from agriculture and agriculture-related enterprises. • Societies with large rural populations, a large proportion of poor household income is non-monetary and then is not calculated in income. • Income tends to be under-reported in surveys.

17. Poverty Indicators • Poverty Indicators and ACCION • Expenditures may not be applicable to ACCION’s poverty assessment framework. • Population of ACCION’s clients • Nature of the data (MIS systems capture income, not expenditure) • Other Poverty Indicators • Social Indicators measure welfare more directly • Health • Education • Housing • Vulnerability • But, not used by ACCION in this framework • Poverty is usually measured at the household level, even though this is not the best (Deaton 1997)

18. ACCION’s Framework • Starts out with many core questions that explore the relationship between poverty levels, economic levels, economic activity, and credit history. • Collects data to address these questions from MIS systems of ACCION and affiliated organizations • Must consider the data availability and cost of execution.

19. Data Comparison • Several Sources of Data • National Level Data • LSMS Surveys (Living Standard Measurement Study) • Sponsored by World Bank working with National Statistics Institutes • Good breadth and depth of information • Asks about specific expenditures and sums them up for aggregate expenditures, rather than just asking for total expenditures • Problem: Income information is not as in depth as expenditure information • LSMS is the primary source of national household data. Haiti is not a part of LSMS, so ACCION is ontaining information from the government of Haiti.

20. Analysis • Poverty Level • To answer questions about poverty, ACCION will look at median income and expenditure of the entire population and compare it with those of ACCION’s clients. • It will compute poverty incidence based on national poverty lines and the World Bank IPL. • Poverty Profile • Looks at demographic variables • Compares large number of socio-economic characteristics for the poor and non-poor across ACCION clients • Distribution Functions • CDFS • Poverty Distributions

21. Analysis • ACCION calculates distribution functions for: • Overall population and ACCION population • Female clients and overall female population • Female-headed households • Households with more than 5 members • Urban and rural households • ACCION clients