Poverty Sensitive Scorecards to Prioritize Lending

The Institutions and Infrastructure program has developed and implemented a methodology that combines both a risk assessment and a poverty scorecard to select projects that will facilitate market integration of producers and other actors in the agricultural production chain in Central America. Projects are evaluated not only in terms of poverty reduction but also in terms of risk in order to assess both their impact on the poor and whether they are sustainable. The aim of this project is to contribute to poverty reduction in El Salvador, Guatemala, Honduras, and Nicaragua through private sector development in rural areas. The specific purpose is to improve the income of small farmers, selected using the poverty scorecard, so that they can improve their efficiency and can be linked to modern value chains.

The project assigns weights to different variables that may affect a project’s risk level, including socioeconomic characteristics of the project’s direct beneficiaries and size and financial characteristics of the group that will carry out the project. The potential impact of each project on poverty reduction is then estimated by the poverty scorecard, using such variables as market access in the area and employment indicators.

For the pilot implemented in the four Central American countries (Guatemala, El Salvador, Honduras, and Nicaragua), a total of 9 projects have been selected, which together involve a total investment of around US$1.7 million and which will directly benefit more than 1,100 smallholders. The next step of the study involves formally evaluating the impact of the selected projects and the effectiveness of the methodology (over the standard risk-based criteria used to prioritize lending), as well as to promote and extend the application of this methodology in further contexts.

For more information on the methodology and selected projects, visit the project website.