PPI Index Certification Awarded to MFI

Thursday, 21 Apr 2011

By Refilwe Mokoena

VisionFund is proud to announce CEVI's (Community Economic Ventures, Inc) certification in its use of the Progress out of Poverty Index (PPI). As the second MFI in Asia to receive this validation from the Grameen Foundation, this outstanding achievement is a reflection of CEVI's commitment to and leadership in social performance.

The PPI, is a statistically accurate poverty measurement tool that was developed with the goal of giving microfinance institutions (MFIs) and other organisations interested in poverty alleviation a simple and reliable way of understanding whether they are reaching their target populations and if these populations are moving out of poverty over time.

Developed by Mark Schreiner in partnership with the Grameen Foundation, the PPI is constructed based on a national household survey, typically a country’s income and expenditure survey. The ten question scorecard is created by selecting the indicators most telling of a household’s poverty level from the national survey. MFIs can then use the total score to calculate the proportion of their clients that lie below an international and national poverty line. These reports highlight whether an MFI is reaching its target clients and whether the clients’ poverty status improves over time. The tool can also allow MFIs to better adapt products and services to clients’ needs.

VisionFund, the microfinance subsidiary of World Vision, believes the PPI will form one of the cornerstones of their overall approach to Social Performance Management (SPM). The PPI will not only enable MFIs to intentionally target poor and very poor clients, but will provide useful information leading management’s decisions to develop a positive impact on children.

Thus far, 13 VisionFund affiliated MFIs are working towards or have begun piloting or rolling out the PPI. VisionFund has developed basic implementation guidelines to assist MFIs and will work closely in acquiring certification. Wherever possible, VisionFund aims to partner with Grameen Foundation and other organisations like Plan International and Catholic Relief Services to support MFIs in this process.

As more MFIs have begun using the PPI, Grameen Foundation recognised the need to standardise the implementation process and validate the results produced. To this end, PPI ‘Standards of Use’ and a certification process was developed to ensure that organisations abide by criteria and that poverty results are reliable. Three levels of standards - basic, advanced, and tracking over time - have been created. In order to be certified, all organisations must meet the basic standards and only those tracking movement out of poverty must abide by the other two. Once an organisation requests to be certified, Grameen Foundation along with an additional qualified volunteer conduct an onsite certification followed by a review of the organisation's results. If the relevant standards are met, the organisation receives certification.

Throughout the implementation process CEVI has built staff buy-in, improved training, and developed information systems. Additionally, CEVI has encouraged field staff to balance working towards both financial and social performance.

Results showed that in March 2011, the proportion of entering clients below the national poverty line was 36%. To increase this number, CEVI plans to automate data consolidation and analysis so reports are simpler to produce. This in turn will help the MFI track the changes of individual clients and segment reports appropriately. CEVI plans to strengthen systems of monitoring, and validation of the PPI both at the branch level and in the MIS. Ultimately, the goal is to design products better suited to the poor and include client targeting and outreach within the staff incentive scheme.  

VisionFund is enthusiastic about the initial implementation of the PPI in CEVI’s operations. Equally the organisation is encouraged to see more MFIs implement the PPI and in turn, gain a better understanding on how to target and respond to the needs facing the entrepreneurial poor.

VisionFund, the microfinance subsidiary of World Vision, serves roughly 650,000 borrowers in 40 countries.