Defining “Poverty”

A simple plan
There have been many varied measures of poverty established over the past two decades in our global efforts to alleviate poverty. Hundreds of National Poverty Lines have been established by individual country governments, and institutions such as the World Bank have used figures ranging anywhere from $1.00 to $2.50 per day. Individual academics and organizations have even developed their own poverty indicators to address the complexity of poverty measurement. When looking to benchmark poverty in a way that is not overly complicated, yet still recognizes the regional diversity of countries across the globe, Truelift builds upon the work of all of those in the field of poverty alleviation who have sought to determine a poverty line.

 

As a simple global benchmark, Truelift references a poverty line
that approximates the bottom ~40% of the population.

Poverty Rates (from manifesto)graphic by Frances Sinha

In many countries, the national poverty line is about the same as the bottom ~40%, as can be see in the graph above. This definition intentionally reflects a level that is practical, achievable and relevant to ensuring deep financial inclusion. Broadly, it represents outreach to the bottom half of the financially excluded. At the same time, in order to recognize MFIs that have achieved deeper outreach to the very poor, Truelift’s indicators identify the percentage of clients from the bottom 20% as well.

Acknowledging complexity
In reality, however, we know that defining poverty is anything but simple! While it is certainly important to ensure that the data collection required is straightforward and the cost remains accessible for practitioners, accounting for contextual factors is also essential in an accurate methodology. For example, when we look to determine what is poverty in Jordan, Bulgaria, India, Cambodia, and Honduras – it is clear we will see quite different contexts in these countries. In order to account for this context, Truelift will define specific reference points country by country: in lowincome countries, the benchmark may approach ~60%, while in high-income countries, it may be only ~20% – these are exceptions made for the outliers, but for the majority of developing countries, the “bottom ~40%” seems to most closely approximate how the nations themselves define poverty.

The Truelift definition of poverty will also account for sub-national differences in context, as can be seen in India, for example, with the rural Manipur region outside Bangladesh and the Rohini region, where we find New Delhi. Truelift will recognize both rural and urban poverty, outreach to marginalized communities, and other indicators of poverty used by an MFI.

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