Recently, the MIF published a study on how microfinance institutions and others in Latin America and the Caribbean use Grameen Foundation’s Progress out of Poverty Index (PPI) to measure the impact their work has on reducing poverty. The study also got me thinking about how my colleagues and our counterparts in international development use this tool ourselves—and about how other, perhaps unexpected, entities use it.
We at the MIF and the IDB, along with the World Bank, dream of a world free of poverty, and the PPI is arguably the most reliable and cost-effective tool for measuring the progress that we make toward reaching that goal. However, I am sorry to say that all too often I encounter evidence that even though we claim to use the PPI, many in the development world still don’t seem to understand exactly how it works. Here are a few examples I collected recently:
“It is necessary to tailor PPI specifically to the agriculture sector. Some farmers have lots of assets like land and tractors, but often are poor. I don’t see such questions in the PPI questionnaire.” (Remark by an agricultural expert at a US-based NGO)
“All beneficiaries of the project are those who live below the poverty line with households incomes of US$ 2-4/day. The project will use the PPI in the countries where it is available. The PPI measures changes in poverty levels.” (Excerpt from a MIF/IDB project document)
If you didn’t see what was wrong in those statements, you should definitely read our new study. (Here’s a hint: The PPI is meant to tell you only how likely it is that a household with a given PPI score falls below a selected poverty line.)
So if development banks and NGOs aren’t using the PPI correctly, who is? The answer might surprise you. Today, an increasing number of large food and beverage corporations have familiarized themselves with the PPI and other poverty measurement tools. How come? The answer is simple. For food and beverage businesses, the quality and availability of raw materials used as inputs is a critical issue. This means, then, that helping small producers and paying attention to their living conditions is a priority. Interestingly enough, these businesses have now started applying the PPI to the small farmer suppliers they work with in developing countries.
The PPI was originally developed for microfinance clients, but as our study shows, it can also be used for non-microfinance beneficiaries. But while we were still exploring it as a possibility, a few corporate giants have already tested it, with many others following their lead. How is it that they have gotten a head start on this initiative? Well, simply because it is perfectly aligned with their core business goals.
But wait a second… Isn’t it ironic that we, development practitioners, are falling behind these icons of global capitalism in using one of the most essential and easy-to-administer tools to measure poverty? Perhaps it is time for us to remind ourselves of our own core business goal. Is it to “eliminate poverty,” or not?