However, the PPI doesn’t tell you what exactly those households need. When we observe economic poverty, we typically also see that people lack housing, health, and resilience, a few specific outcomes identified through SPTF’s experience in the field of microfinance. But just because a household is economically poor, it doesn’t necessarily follow that it is underserved in all aspects of well-being, nor that its needs are the same as others. For example, one low-income farming family may be producing regular income from their crops, but lack access to a toilet. In the same village, their low-income neighbor may have a toilet, but works as a laborer and lacks consistent cash flow. While access to sanitation would help the first family, the second family needs access to financial services.
While the PPI does not tell us what exactly households need without further analysis, the data can help an organization learn more about who they are serving and suggest where they may be underserved in relation to specific, important positive outcomes. The PPI is country-specific and based on each country’s national household income or expenditure survey. The model behind the PPI gives the user a short-cut allowing us to ask just a small number of questions from the national survey (usually 10) and still get a pretty accurate prediction or estimate of the poverty level of the household. In addition to a poverty likelihood, the PPI questions typically provide valuable data about household demographics, housing characteristics and assets.
Some of Oikocredit’s microfinance partners have designed loan products specifically for improving housing conditions for clients who were identified as being potentially underserved in terms of physical infrastructure through the PPI. Through the PPI questions, they had information on the materials used for the roof, floor and/or walls which provided suggestions for further research on what their clients were lacking. Similarly, KOMIDA, a microfinance service provider in Indonesia developed a ‘sanitation loan’ after data from the PPI data supported what an investor had noticed in one branch about clients lacking access to sanitary latrines. KOMIDA now monitors the proportion of its clients who have access to a toilet.
If you want to see if your intervention’s effect is deep, long-term and/or happens quickly (how much) and whether it was better than or worse than what might have otherwise happened (contribution), then the Impact Management Project is a great resource for other tools and frameworks that can complement the poverty information you have from the PPI. For example, the type of research that IPA does is important for understanding contribution and determining which strategies are particularly effective for achieving impact for specific groups of people.