The Power of Prizma’s Poverty Scorecard: Lessons for Microfinance

How well does Prizma’s poverty scorecard identify poor clients? The scorecard applies 0/1 weights to seven simple and inexpensive-to-collect indicators to give a score from 0 (most likely poor) to 9 (least likely poor). The scorecard has good power, not only for ranking clients by relative poverty but also for identifying the likelihood that a client is poor by an absolute standard. While poverty outreach varied across branches and products, the scorecard suggests that Prizma’s overall poverty rate among new clients is about 18 percent, close to the rate for Bosnia-Herzegovina as a whole. Technical refinements improve the scorecard’s power, though not by much, as most power comes from a single indicator, how often the client eats meat. Still, one-indicator scorecards overstate Prizma’s overall poverty rate. Loan size is an indicator of poverty, but the scorecard is more powerful. Overall, poverty scoring can help microfinance organizations target the poor, track changes in clients’ poverty over time, manage depth of outreach, and report on clients’ absolute poverty.