John de Wit: When it comes to measuring client poverty, people are concerned about a number of things. First of all, they're saying: It's too hard to do it; it's too costly to do it; and we can't measure absolute poverty…. Well, my presentation is all good news. First of all, it's not hard to do it, and it's actually fun to do it. The poor get motivation out of doing this; they enjoy doing it; and, it makes your life a lot easier….Secondly, it's not expensive to do it, and I'll show you why I say that. And the next bit of really good news, especially for Kate, is that in fact, essentially, we do have measures right now that do measure absolute poverty and they just need a tiny little bit of work and they will give you numbers against absolute poverty….

...What I mean [when I talk about poverty targeting] is that when an MFI goes into a community or into a village, what we do is we literally rank every single household in that village, in that community, in that section of the town so that we know what their relative poverty is….So, you know at the end of the day every single household: This one is amongst the poorest; this is amongst the richest; this is middle….

…[L]et me move onto one of those objections—the thing about it being too costly….We have been doing Participatory Wealth Ranking (PWR)…since 1996. We have done thousands of households…. If you want to rank 1,000 households, 1,000 households in our context will give us 200 clients.… You'll have 200, and you'll maintain 200…. To rank that, you need three days of branch manager time. So somebody who's the equivalent of a branch manager or branch manager skills, branch manager salary. I'm putting it in these terms, because if I give you dollars, it becomes meaningless because what you pay people in dollars in South Africa and what you pay people in dollars, in Nepal is very, very different. So, I'd rather put it in these terms. Then, you can convert very easily into your context. So, you need three days of branch manager time; you need five field officers for two days; you need very minor catering costs. And, so the cost per client works out at 0.38% of a field officer's monthly salary. It's 0.38% of the monthly salary of one officer per client.... So, what that means is that if you took a whole month's salary, you would be able to rank 2,600 households for a whole month's salary. 2,600 households…would give you 526 clients. That's active clients for ever and ever….

So, now, let me just put it in dollars for a moment. In the South African context, I would have to pay a loan officer $300 a month. So, for $300, I can get 526 clients. If I was in Bangladesh, for something like…$70, I can get 526 clients. So, I'm ranking 2,600 households for $70 and I'll end up with 500 clients. So do the numbers, and this becomes cheap….take your expenses and your institution and you rank them. Like, what do you pay the most for? Probably, salaries would be your highest expense then probably motor vehicles and such things. And, this wealth ranking will come right down, so low down you would hardly even see it on your list of expenses. So, I wish to never ever hear again that it is too expensive to do this.

...[W]hen you are doing participatory wealth ranking, you're not only ranking the households, you're also learning a tremendous amount about the community. And, you're doing a tremendous amount of marketing in that community. So, you actually would have to now cost that out. What will it cost you to do the same marketing? Because, on day one, when you launch your operations, already most of the community knows about your program….So, it's a huge advantage….And, then, knowing about the community—where are the richer areas, where are the poorer areas, where is the post office, where is the income supply….huge amounts of information will come while you're doing this exercise. So, we really should take the cost of that and subtract it from this other cost.

Okay, the next thing: It's too hard; it's too difficult…maybe this section of it being hard and difficult comes from people's idea of large income expenditure surveys. And, I must say I hope my following speakers are not going to talk about these things. My only experience with income expenditure surveys is that they are so unreliable. They are extremely expensive. I just don't see how they work....We've actually seen up close where a top academic came and did a large amount of income and expenditure work with us, and we saw what it was like. And, it's absolute rubbish.... I mean it is unbelievable if you look at the way he did it and how on earth you could get any results you could rely on. And you compare with other information which we can cross-reference, and it makes no sense. It doesn't link up in any way. So, that might be why people get this worried ... [and say] this stuff is just too expensive; it's too difficult.

A counter evidence is that if you look in [The State of the Microcredit Summit Campaign Report 2002] that you got in your pack, you'll see that there are 341 organizations that are currently using either PWR or the CASHPOR House Index (CHI). Five years ago, when we started this, I think there were probably 20 organizations. The fact that so many organizations are doing it [implies that] they aren't finding it too hard, and they're not finding it too expensive. Definitely not. I mean that's probably the strongest evidence…. There we are; we have 341 people who are doing it, and the number is increasing as you will see from the numbers in the [report]. The numbers are increasing rapidly. So, CASHPOR has used the CHI to rank what must be hundreds of thousands of clients by now…. We've been using it for seven years, and it ranked thousands of clients.

I want to quickly say why do we really have the tool. So, I have to quickly explain to you how PWR works. The first step is when you go to a village, the first thing you do is you get a group of volunteers from the village who help you to map the village. So, they will draw a map on the ground or on the floor of a church with chalk so they can draw every single household… and they'll number every household. It's a very participatory exercise. It takes a morning to do it for a section of 100 households…. The next step …you just take a small group of people, a reference group, and have a discussion with them on poverty... what does poverty mean. You can't just come along and say "okay, who's poor" and "who's not poor?" You must have a discussion about what is poverty in their context. You then ask the group to take one of the households [and] tell you about the poverty of that household, put it on the floor. …So, we've now put John's household down on the floor there. You now take the next household. You discuss this household and decide whether it's poorer or richer than John's household. Whenever it's poorer, you'll probably put it there [to the left]. Then, you'll take the next household and discuss that. And, either you're going to put it in the same pile as let's call that Mary or …John, or what's a bit richer or what's a bit poorer. And so people go on with every household in that village, ranking them until at the end of the day you'll end up with maybe five or six or maybe eight piles which go from the poorest people to the richest people. You then have to do a triangulation of results [by doing the same exercise with two other groups] to make sure that nobody is trying to push all their relatives into the pile which is going to get the loans at the end of the day….

What you'll end up with is a number of piles. And, you'll end up with a description of what the characteristics of people in each pile are. So, in pile #1 I've got the…single parent or parents unemployed. There's no family to assist [them]; the family relies on begging, frequently that's the way they survive. There's insufficient quality and quantity of food, no assets, nobody to educate children.... Let's have a look at the next pile.... This is the way the piles look in my program. So, the next part would be something like fully paid temporary jobs. Now, you will actually be able to establish more or less what is that income of that job. Ask people well, it's temporary jobs—"When is it?" "How long is it?" "How much do people get paid?" So, you can start getting a Rand amount [Rand is the currency in South Africa] for what that means. Then, you have the pensions of many children. In South Africa, there's a state pension. So, any household that's getting a state pension, you know exactly what that pension is—it's 650 Rand right now. So, the pensions of many children will end up in that second pile. So, you start getting a number of reference points in that pile that refer to income. Let's take the next one. So, here we have that the people earn enough for daily needs and that they're mainly self-employed or got temporary work. So, again from the temporary work, you can find out how much are people earning from this temporary work. And, of course, you can do some cross-checking. Well, if you said that these people earn 300 Rand from temporary work but, then, these other people earn 400, why are they in the same pile? And, then, maybe you start getting other explanations. "Yes, but they're getting money in from the cities." So, you begin to build up a picture of the income and the different income streams that are coming in for each group. And, by reference point all the time, it's going to be this 650 Rand for the pensioners. So, for me, what we can now do is we can now know . . .This is the income of the household. As soon as you've got the income of the household...well, then, [you] now refer it back to national poverty lines, to the dollar a day, purchasing power parity (PPP) and [it] becomes a relatively easy exercise. We know we can do it with PWR. I don't know the CASHPOR House Index well. I know a little bit about it. I'm pretty sure that you can do it with the CASHPOR House Index.

Read remarks by John Hatch