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Red, yellow or green? You decide.

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Dear reader,

If you would have to rate yourself with respect to access to electricity, which of the colors below would you choose?Picture 1

  • Red: Your family does not have access to electricity
  • Yellow: Your family has access to electricity but it is clandestine and/or not constant
  • Green: Your family has permanent and non-clandestine access to electricity

And how about the ability to read, write and comprehend your native language?

  • Red: At least one adult member of your family does not know how to read and write
  • Yellow: The adult members of your family know how to read simple texts but find it difficult to comprehend and are not able to write texts that are understandable to others
  • Green: All the adult members of your family know how to read, write and comprehend

Did you choose “green” twice? Congratulations, you are considered not to be poor in these areas.

Fundación Paraguaya has developed a practical methodology that gives poor families the tools to self-diagnose their own multidimensional poverty as a first step in developing personalized strategies to lift themselves out of poverty permanently.

This is what the Poverty Stoplight has been for thousands of families in Paraguay and aspires to be for many more families around the developing world.

Dimensions and indicators
The Poverty Stoplight is a methodology that divides the concept of poverty into 6 different dimensions, each dimension containing a several specific indicators, adding up to 50 in total. As the name suggests, it uses stoplight colours: Red (for Extremely Poor), Yellow (for Poor), Green (for Not Poor).

The dimensions are as follows:
1. Income & Employment
2. Health & the Environment
3. Housing & Infrastructure
4. Education & Culture
5. Organization & Participation
6. Self-esteem & Motivation

Poverty is multidimensional and different for each family

Poverty is multidimensional and different for each family

Existing measurement tools

As I hinted at the end of my previous blog entry, poverty is multidimensional. A family may have a per capita income above a certain (inter)national threshold, yet still be poor due to a lack of clean water, decent housing, access to education or healthcare, and other requirements for a decent life. Already, several poverty measurement indices exist that are looking beyond income levels.

The global Multidimensional Poverty Index (MPI), for example, is an international measure of acute poverty covering over 100 developing countries. The MPI can be used to reveal poverty patterns within countries and over time, which enables policy makers to target resources and design policies more effectively.

A particularly interesting example is the Cashpor House Index (CHI) in India, which is based on the height of the wall and material used in the wall and roof of a house. Basically, it means the higher the house, the richer the family.

A widely used tool is one created by the Grameen Foundation: Progress out of Poverty Index (PPI), which uses the answers to 10 questions about a household’s characteristics (e.g. number of members, type of floor) and asset ownership (e.g. freezer, television) to compute the likelihood that the household is living below the poverty line. The tool is adapted to each country by using their national household survey (or another equivalent survey) to find the indicators most highly correlated with poverty. With the PPI, a microfinance institution (MFI) can identify the clients who are most likely to be poor or vulnerable to poverty and make their products more effective towards the clients’ needs. Today, there are PPI scorecards for 55 countries.

How is the Poverty Stoplight any different?

First of all, an important aspect of the Poverty Stoplight is that the families understand the concept of their poverty. Every family is poor in its own way, and self-evaluation enables the poor to see and understand the ways in which they are poor and non-poor. Loan officers at Fundación Paraguaya have experienced clients presenting their non-hygienic and ‘incomplete’ kitchens, bathrooms etc. with great pride because they are used to a certain standard. Imagine someone that grew up having a bathroom with a latrine that lacks a flushing system and is shared with other families, and all of the families in the same community have the same type of bathroom. Why would this person aim for a more hygienic standard? The Poverty Stoplight helps to create awareness about other “realities.”
Because the families will have to use the tool themselves, the Stoplight design is universal and simple to understand: red is an alert, yellow requires attention and green is positive. Given that many poor families are functionally illiterate, each level of each indicator includes a photograph or drawing representing the local context.

One of the 50 indicators: Access to drinking water

One of the 50 indicators: Access to drinking water

For example, to represent the three levels in Paraguay for access to drinking water, the Stoplight includes a photograph of a woman carrying a bucket of water on her head (extreme poor), a well located within 100m of the house (poor), and a faucet at home (non-poor). In this way, the person can quickly indicate which photograph best represents her family’s situation in terms of access to drinking water.

The loan officer sits down with the client (and perhaps more family members) to go through all 50 indicators and the data from this initial visual survey provides the baseline against which to measure each client’s progress in overcoming poverty. This generates a heat map that allows the family to see at a glance in which respects the family is poor and not poor. This brings me to the next important difference with the other poverty indices.

Poverty Stoplight for one family

Poverty Stoplight for one family


Personalized strategies
Just as with the PPI, the data that the tool generates could help MFIs in designing their strategy and products more effectively to address the needs of the client. More importantly, the Poverty Stoplight allows the families to create their own personalized strategies to get out of poverty based on the information from the visual survey.

As mentioned before, creating awareness is an important first step. Finding the right motivation is a necessary second.

Fundación Paraguaya uses two theories to endorse this. The first one by Ken Wilber looks at a situation from four different angles. For example, in the case of a microcredit client who has no front teeth, is it because she does not take care of her teeth and does not go to the dentist (i.e., a behavioral issue)? Is it because there is no dentist in her village (a systemic problem)? Is it because in her community, a complete set of teeth for an older woman is not really valued (cultural)? Is she afraid of going to the dentist (intention)? We can understand why she is missing teeth and come up with an effective solution only if we can answer these four questions.

Of course, the same questions can be applied to a person’s income or lack thereof, or to their access to drinking water, housing, vaccines, education, and other similar poverty indicators.

The second theory of Joseph Grenny (and others) about the power to change anything, relates to motivation and skills at an individual, group and systemic level. Combining this with the family’s data from the Poverty Stoplight survey and the understanding of the source(s) of a problem (Ken Wilber’s theory), the loan officer can empower and assist the family in designing a strategy to improve their situation for any indicator that is not green yet.

A holistic approach takes time

On the downside, applying the Poverty Stoplight takes more time than the other indices. Not only are there more dimensions and indicators, it also requires substantial commitment and follow-up from loan officers. Undoubtedly, the tool will become more efficient in the years to come, but the reality remains that not every MFI will be willing to put up the resources to implement and conduct lengthy poverty assessments.

The challenges of implementing the Poverty Stoplight at Fundación Paraguaya and replicating the model in other countries will be my blog topic for next week. Stay tuned!


Picture 5

This is me playing around with the latest version of the Poverty Stoplight


Dennis van Erp is working out of Asunción, Paraguay, where he’s collaborating with Accion partner Fundación Paraguaya on developing a business plan for their microlending program.

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