Measuring poverty outreach: how two different microfinance institutions used the Progress Out of Poverty Index
An enduring question for the microfinance industry relates to the issue of balancing poverty outreach with financial sustainability. The recent development of poverty measurement tools such as the Progress Out of Poverty Index) and the USAID Poverty Assessment Tool has enabled microfinance practitioners to generate accurate data on the poverty levels of the clients they serve. Preliminary results indicate that some microfinance institutions are indeed able to reach a very high share of poor and very poor clients, and to do so sustainably. This article demonstrates how two Grameen Foundation partners, operating in very different contexts, have been able to reach a large share of very poor clients and maintain profitability. It shows that there are likely to be a number of key strategies rather than a single, standard methodology for reaching the very poor. The article presents evidence that indicates MFIs that tailor products and services to meet client needs will be successful in meeting the twin demands of financial and social performance – a goal that the PPI facilitates.