Using poverty data to make microfinance work for clients
For Grameen Foundation, innovating in product design and adaptation starts with poverty outreach data
Grameen Foundation is a global organisation that combines microfinance, technology, and innovation to empower the world's poorest people to escape poverty. The principle that guides their work is that microfinance institutions (MFIs) cannot help the poor unless they intend to help the poor. The key to success, in their view, lies in having a reliable picture of outreach and change. For this reason, they have developed the Progress out of Poverty Index (PPI), a simple and cost-effective tool which measures the likelihood of a client being in poverty.
The PPI measures poverty much like a ruler measures height. The PPI provides critical business information for any organisation that intends to effectively serve the poor.
In doing so, it enables MFIs to:
- Target clients by poverty level and measure their client outreach: not only for themselves, but for social investors and other industry stakeholders
- Manage performance against objectives: segmenting poverty outreach and change by branch, employee, product, gender, industry and more
- Understand progress over time: with multiple years’ worth of poverty data, PPI users can start making some reliable statements about impact and change.
- Build other management processes around a core of regular and reliable data.
This data also helps them to tackle questions around “what works for clients?” Specifically, it means asking how they can design better services that meet the needs of clients. In recent years, they have been identifying solutions for the poorest around savings and livelihood programmes, and re-examining organisational systems from the point of view of re-examining organization systems from the perspective of the client.
For Grameen Foundation, one key skill that the industry as a whole needs to develop is around product sequencing — that is, knowing what products work at what time in a client’s journey out of poverty, and with what additional services at what time. They have recently published a paper on one practical approach to sequencing, which can be found here. In their view, if the industry can demonstrate progress on this issue in the next few years, then we will have made a positive contribution to the needs-led approach to microfinance.
The question of “what works for clients?” is at the heart of the Imp-Act’s future learning agenda. Microfinance has the potential to add value to the lives of clients — and Imp-Act’s 12 members, including the Grameen Foundation, are leading an industry-wide initiative to find out what systems, products and strategies make the most difference to clients.
The Imp-Act Consortium unites 12 organisations at the forefront of the global SPM agenda. Our strength is the combination of practical experience and thought-leadership.