$1.25: The tip of the iceberg

We’ve long since understood poverty in terms of financial impoverishment, but there is far more to poverty than simply a lack of money.

Traditionally, the World Bank has defined poverty in terms of household income level, estimating that a quarter of the developing world lives in “extreme poverty” – struggling to survive on US$1.25 a day or less. But does this widely accepted definition tell the whole story?

Reference only to a monetary measure assumes that limited financial resource is the only barrier to fulfilling basic needs. Evaluating monetary indicators alone is also problematic in the way that it only counts as ‘poor’ those who are deprived in income – to the exclusion of all others deprived of access to other basic human needs. As a result, monetary measures can omit or over-represent significant levels of poverty in some areas and misidentify it in others. For example, prior studies have found that in India, 43% of children and over half of adults who were not considered to be living in monetary poverty were in fact found to be capability poor when assessed using education and health indicators. Likewise, more than half of all nutrition-poor children were not actually considered monetarily poor. 

Now the world of development is being introduced to a new international measure of poverty – the Multidimensional Poverty Index (MPI), complementing the traditional monetary system. Developed by researchers from Oxford University in conjunction with the United Nations, the index builds upon monetary indicators by reflecting a range of additional deprivations affecting a person’s life. The MPI uses 10 indicators across three critical dimensions – education, health and standard of living at the household level – directly measuring not only how many people are living in poverty but also the composition and intensity of the poverty experienced.

Indicators:

1. Education – years of schooling and child enrolment
2. Health – mortality (any age) and nutrition
3. Living standard – electricity, sanitation, drinking water, floor, access/use of cooking fuel and asset ownership

Identifying not just who is poor but the nature of deprivation is crucial to the formulation of holistic interventions. Dubbed the ‘high resolution lens’ on poverty, the MPI allows us to appreciate the various sources of poverty for a given region, population group or nation, and suitably tailor development strategies. The MPI also shows which deprivations are most common in different regions and among different groups (gender/age/ethnicity), allowing us to identify those in greatest need as well as the most beneficial interventions for them.

Additionally, the MPI reveals the intensity of poverty – the total of weighted deprivations each household experiences at once. A person deprived across 80% of the indicators is therefore considered to be experiencing a higher level of poverty than one deprived in 60% of the indicators. The index can also be used to show changes in the composition of poverty over time so that progress (or lack of it) may be monitored.

To create the index, researchers collated data from 104 countries with a collective population of 5.2 billion (78% of the world’s total). Interestingly, one third was found to be living in multidimensional poverty, exceeding the World Bank’s estimate of 1.3 billion by an additional 400 million. More specifically, half of the world’s poor as measured by the MPI was found to be living in South Asia (51% or 844 million people), while one quarter resided in Africa (28% or 458 million). One of the most surprising findings? More poor people were found to be living in poverty in eight states of India than in the 26 countries of sub-Saharan Africa combined.

Social Performance Management

As part of Opportunity’s commitment to developing client-focused programs that maximise impact on people in poverty, we hope to not only help people become economically self sufficient but also help improve their quality of life. Our Social Performance Management (SPM) program mirrors the holistic indicators of the MPI to better assess poverty levels and a person’s progress out of it. As well as assessing income levels, the SPM program measures other indicators of deprivation included in the MPI, including asset ownership, education, access to health services and nutrition. In doing so, SPM helps Opportunity’s microfinance partners understand the needs of clients and measure how they benefit from the provision of microfinance and support services. By monitoring these broader measures of poverty, Opportunity can further develop our outreach and interventions, ensuring that every donation given has the biggest impact possible.
 

Sources: Guardian, Oxford Poverty & Human Development Initiative