What is poverty? For decades, we have defined it with a number, which the World Bank currently puts at a personal income of less than $1.90 per day. But a single number fails to capture the complexity of poverty. Measuring more than just income is essential to understanding the needs of poor people and delivering optimal assistance.
As the World Bank convenes its Spring Meetings in Washington, DC next week, we have an opportunity to set benchmarks that include social and environmental dimensions of poverty. The Bank has acknowledged that more than income should be considered, and recently established a Commission on Global Poverty to recommend additional metrics.
When we rely on a single number to measure poverty, we misdiagnose the needs of poor people. In my home country, Paraguay, I work with one of the country’s largest social enterprises, Fundacion Paraguaya, to provide microfinance, education and training to thousands of our poorest citizens. We look at 50 metrics across six dimensions of poverty, including income, housing, education and infrastructure.
One of our clients, Doña Mercedes, is now a successful micro-entrepreneur from a rural community not far from the capital city of Asunción. When she first started with Fundación Paraguaya, she was sharing a single-bedroom home with 16 other family members and cooking meals on a small fire pit on the dirt floor. Now she has a cement floor, a brick house, a separate kitchen and around $500 in personal savings.
By using Fundación Paraguaya’s self-evaluation on poverty, she was able to understand her own needs better and address them one at time. While traditional approaches focus largely on estimating the sources of household expenses and income, the Fundación Paraguaya self-evaluation helped Doña Mercedes break down her needs into 50 discrete areas that she could work on, piece by piece, and monitor over time.
A simple poverty map helps her track her progress by using the colors of the stoplight, red, yellow and green, and highlight her priority areas. Next she plans to add two more bedrooms to her house and to work on enlarging her business.
Fundación Paraguaya has been able to replicate this type of success in other parts of the world. We could make even more progress with public-sector support. Fundación Paraguaya collects rich data across multiple dimensions, tracking more than 8,700 families each year in Paraguay alone. If this information were to reach the government of Paraguay — which has its own methods for collecting data — we could identify pockets of poverty sooner and customize programs to help each family. Because the information is self-reported, this sort of collaboration could deliver targeted aid and highlight specific public services that are needed.
Moreover, if the World Bank’s Commission on Global Poverty adopts multidimensional poverty measures, it will spur other organizations to produce and share more detailed poverty data. It won’t be easy to choose which measures to include, or even how to set universal yardsticks; but even adopting a few basic ones would spur progress.
Fortunately, the World Bank now appears to recognize the limits of its income-based indicator. Ensuring that the right type of aid reaches those most in need in a timely and effective manner requires development policymakers to embrace the type of multidimensional poverty data that aid organizations have learned to gather.
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©Project Syndicate
