This paper presents an easy-to-use poverty scorecard that pro-poor programs in Bangladesh can use to estimate the likelihood that a household has expenditure below a given poverty line, to monitor groups’ poverty rates at a point in time, to track changes in groups’ poverty rates between two points in time, and to target services to households.
The direct approach to poverty measurement via surveys is difficult and costly, asking households about a lengthy list of expenditure categories such as “What was the value of firewood consumed that was bought in cash/credit or wages in-kind? What was the value of firewood consumed that was produced by the household or received? What was the sum of them? . . .”)
In contrast, the indirect approach via poverty scoring is simple, quick, and inexpensive. It uses ten verifiable indicators (such as “What is the main construction material of the walls?” or “Does the household own a television?”) to get a score that is highly correlated with poverty status as measured by the exhaustive survey.
The poverty scorecard here differs from “proxy means tests” (Coady, Grosh, and Hoddinott, 2002) in that it is tailored to the capabilities and purposes not of national governments but rather of local, pro-poor organizations. The feasible poverty-measurement options for these organizations are typically subjective and relative (such as participatory wealth ranking by skilled field workers) or blunt (such as rules based on land-ownership or housing quality). These approaches may be costly, their results are not comparable across organizations nor across countries, and their accuracy and precision are unknown .
Suppose an organization wants to know what share of its participants are below a poverty line; for example, it might want to report using the USD1.25/day poverty line at 2005 purchase-power parity for the Millennium Development Goals. Or it might want to report how many participants are among the poorest half of people below the national poverty line (as required of USAID micro enterprise partners). Or suppose an organization wants to measure movement across a poverty line (for example, to report to the Micro credit Summit Campaign). In all these cases, the organization needs an expenditure- based, objective tool with known accuracy. While expenditure surveys are costly even for governments, many small, local organizations can implement aninexpensive scorecard that can serve for monitoring, management, and targeting.
