Testing a methodology to assess microcredit target poverty in Bosnia-Herzegovina

The aim of the work is to develop new tools for targeting the poor, tracking changes in poverty over time and reporting on people poverty in the contest of microcredit and microfinance interventions. The chosen methodology uses a poverty scorecard (Schreiner, 2006) applied to a rural context in Central Bosnia-Herzegovina were, since 2005, Schreiner, Matul and Kline, elaborated a scorecard method to rank clients of PRIZMA, a Bosnian MFI, by relative poverty and the likelihood that a client is poor by an absolute standard. The poverty absolute standard was derived from the LSMS (World Bank, 2002), the State Agency for Statistics in Bosnia-Herzegovina and the federation Statistical Institute and the Republica Srpska Statistical Institute. The methodology is based on a selection of seven household indicators, chosen to be strongly correlated to poverty status, local context and easy and inexpensive to collect. Then a scorecard is derived by assigning weights to reflect their correlation with poverty status. Finally, weighted indicators are added up to produce scores that can be ranked. We applied the methodology to a microcredit international cooperation intervention promoted by no-profit Italian stakeholders. Our purposes were both measuring the poverty profile in order to build a monitoring instrument to evaluate projects and tracking a model to be replicated from other actors.