About the PPI: A Poverty Measurement Tool

The Poverty Probability Index (PPI®) is a poverty measurement tool for organizations and businesses with a mission to serve the poor.  The PPI is statistically-sound, yet simple to use: the answers to 10 questions about a household’s characteristics and asset ownership are scored to compute the likelihood that the household is living below the poverty line.  With the PPI, organizations can identify the clients, customers, or employees who are most likely to be poor, integrating objective poverty data into their assessments and strategic decision-making.

Why Measure Poverty?

Your organization may operate in a highly-impoverished area, but without objective poverty data on the households you reach, social performance management will rely on assumptions. Organizations that collect poverty data from all or a statistically significant sample of households they reach are able to:

  • measure poverty outreach (i.e. the portion of customers, clients, or employees who live below the poverty line or are vulnerable to becoming poor),
  • improve the performance of the intervention among the poor and poorest, and
  • track poverty levels over time.

With these data, management staff can make informed strategic decisions and can provide stakeholders with objective evidence that the organization is reaching the poor and those vulnerable to poverty.

How Does the PPI Work?

Unlike other poverty measurement methods, the PPI was designed with the budgets and operations of real organizations in mind; its simplicity means that it requires fewer resources to use.  The PPI is a set of 10 easy-to-answer questions that a household member can answer in 5 to 10 minutes. The questions are simple – “What material is your roof made out of? How many of your children are in school?” The scored answers provide the likelihood that the survey respondent’s household is living below the national poverty line and other internationally-recognized poverty lines. The PPI is country-specific and there are currently scorecards for 60 countries.

Example

The mission of Organization X is to provide discounted vocational training to Colombia’s poorest citizens. The organization uses the PPI for Colombia to determine if they are, in fact, recruiting clients who live below the poverty line.

The organization administers the survey to one client, and that client receives a score of 30. According to the look-up table for the PPI for Colombia, that client’s household has a 42.6% likelihood of living below the $2.50/day 2005 PPP poverty line. After surveying a statistically significant sample of clients, management discovers that the average likelihood of clients living below the $2.50/day poverty line is 60.7%. Therefore, the organization concludes that 60.7% of its clients are living below the $2.50/day poverty line.

Get Started with the PPI

Visit the Getting Started section of our website to learn more.

The History of the PPI

In 2005, Grameen Foundation commissioned the development of the Progress out of Poverty Index® (PPI®) with the support of the Consultative Group to Assist the Poor (CGAP) and Ford Foundation. Their goal was to create an easy-to-use poverty measurement tool for microfinance institutions, understanding that these institutions need reliable poverty data to manage their social performance.

Mark Schreiner’s simple poverty scorecard resonated with Grameen Foundation because of the characteristics it shares with the Grameen Bank's 10-Point System. The Prizma Microfinance (Bosnia) scorecard also inspired the development of the PPI. After pilot testing the PPI, Grameen Foundation instituted a training program for MFIs interested in using the PPI, which helped to facilitate initial adoption of the tool.

Today, the PPI has proven its reliability and feasibility to many organizations around the world. Armed with client-level poverty data, these organizations are now making more informed decisions and assessments. The PPI is now used by a wide range of organizations—international NGOs, social enterprises, donors, investors, multi-national corporations, governments and more—across a variety of sectors including agriculture, healthcare, education, energy, and financial inclusion.

In July 2016, in order to facilitate the long-term sustainability of the tool, the PPI Alliance was formed and the PPI moved its home from Grameen Foundation to IPA and created a new construction methodology behind the PPI. In October 2017, the PPI was rebranded as the Poverty Probability Index. Read more about this transition here.