And so we had to start questioning ourselves, �What do we do about it?� After some time we realized that the issue is in fact, that of targeting� [of very poor clients] that Grameen Bank and CASHPOR have been preaching all the time. So then we launched the second program which stressed targeting, and that program is very different in character in terms of the clients of our initial program.

If you look at the housing, then the clients in the microenterprise program generally live in mud houses. When it comes to schooling, you�ll find that about thirty percent of the children of the poverty program don�t go to school at all. It very, very seldom happens that children of clients of the other programs don�t go to schools in the poverty program. This is generally because the parents can�t afford a school uniform for the children. When it comes to food, you�ll find that the clients in the poverty focused program don�t eat meat very often. They don�t buy vegetables. They eat meat and fish and such things very seldom. The clients in the other program eat meat quite often, and they do buy meat, they do buy fresh vegetables and their children are the best indication of poverty by far. There�s a substantial difference between the children in the one program versus the others. You�ll find that in the poverty program the children are dirty and are wearing dirty clothing, and they�re not changing their clothing very often. And the main reason is because their parents can�t afford soap. And obviously they can�t afford more clothing as well.

So these are two totally different programs. When asked to answer the question, �If you want to reach the poor, can you simply offer a small loan size?� What we find is that it didn�t work in our case. We have to ask ourselves, why not?

Why did people, who had enough assets, come for such a small loan? And then, the opposite to that, why didn�t the poor join? The people who are better off joined the program because there�s no other access to credit except from loan sharks. They are also desperate for credit and they have very legitimate needs. But they are coming and taking small loans, inappropriate for their own needs, in the hope that one day you will give them a bigger loan. And they are prepared to stay with you for years in the hope that you�ll give them bigger loans.

Now the clients that are very much poorer, why don't they come to you in large numbers? And the reason is, they're intimidated by the wealthier clients. What we've heard from literature from all over the world is what we found in our own case, and through hard experience. The poorer people see who goes to your program, and they just say, �this program is not for us; it is for those better off people.� And then, very often the wealthier people, may be just the less poor, intimidate the poor, simply by saying, �this meeting is for serious people. Here we have to be serious about business. Somebody who is only selling a few vegetables is not serious about business�. Poor people already have pretty low self-esteem, but you add a few comments like that, and they leave. So, the presence of the non-poor unfortunately did scare away the poor. And that's why we have to go for an exclusive poverty focus.

We started using a housing index-method. Such a test, of course, is not 100 percent accurate. David Gibbons reckons these kind of tests are about 80 percent accurate. We recently did a PRA (Participatory rural assessment) exercise, and I must say I think that maybe our test is only 70 percent accurate. But one thing we know for sure is that the clients we are getting from this test are very, very different from the clients we were getting before we introduced the test.

When it comes to the cost of recovery issue, well, for us it's not debatable. We are going to become self-sustaining. And again, we look at the cost-structure; we do long-term projections; we say that when we get to about 30,000 borrowers, then we will be self-sustaining, and we set the interest rate appropriately. So for me it's not an issue of �how do you become self-sustaining?� It's your pricing that is the issue, and obviously your efficiency, and then the determination to become self-sustaining.

All of the replications under CASHPOR have followed that basic principle. We have spent a lot of effort trying to adapt the Grameen approach to identifying the poor, to other conditions in other countries in the region. We feel we have, now, a very cost-effective way of identifying the poor that works in most conditions throughout Asia with some adaptation always necessary. But the basic tool, which I will describe as the housing index, holds from China to Vietnam to Philippines, Indonesia, North and South India, Bangladesh, and so forth. We have moved away a bit from Grameen's targeting, which involves a household interview, because we feel a household interview is too expensive and produces information of questionable reliability, validity, especially if you focus on household income. So we have found an indicator that we think, in most cases, enables us to identify about eighty percent of the poor very quickly. And that is what we call the house index. There are three dimensions of the house, and we can look at it from the roadside. We don't have to conduct any interviews. We just go up and down the lanes in the village and map the houses which appear to be qualified. We look at the size, we look at the physical condition or building materials, and we look at the material of the roof.

The material of the roof is very interesting because that turns out to be a simple but powerful way of identifying the very poor, as distinct from the poor, in most countries of Asia. I'm talking about thatched roofs, roofs made out of woven bamboo, roofs made out of twigs, roofs made out of plastic sheeting. These are temporary roofing materials which always have holes, they leak, always create a health problem for the household. Nobody wants to live under a temporary roof unless they have to. So the people living under these temporary roofs are nearly always the very poor. Now if you combine that with small size of house and very simple building materials - mud, jute sticks, things like that -then you are very close to identifying most of the very poor.

Some very poor people live in bigger houses, for various reasons. They might have inherited a bigger house and now they no longer have any income. So we have an appeal procedure because these people will come up to our field assistants and say, �Hey, how come you are not putting me on the list? I want to participate also .... I have a big house, but I actually have no income. I'm very poor.� So then we say, �Okay, you are an appeal case�. A more senior officer, usually the branch manager, will come and

Now, there is one major limitation of this house index, which I should mention. And that is in communities where there is an effective government housing program, such as in many parts of India now. Then you can have very poor people living in so-called pucca houses (modern brick, cement and concrete houses). But they have nothing else. So it doesn't work where there is an effective government-housing program for the poor. For those cases we have found it very useful to use the PRA method the participatory rural assessment method for wealth ranking. We bring the whole village together to find out who are the very poor, who are the not-so-poor, who are the non-poor, through participatory methods. First, the representative of each household lists their major assets (e.g., land, house, large farm animals, farm equipment, etc.), with their current values. These are recorded on cards, one for each household. Then the name of each household is read out and the villagers are asked to say to which of three piles it should be added: not-so-poor, poor, or very poor. In cases of dispute, the asset list is read out and a final decision is reached by consensus.

Interestingly, we find when we compare the cost-effectiveness of these two methodologies, the house index versus the PRA, they come out almost exactly the same. It takes about five minutes for an experienced field assistant to use the house index properly, and it takes about five minutes per household to use PRA properly, if you break it down. So these are practical alternatives. They can be used according to the local circumstances. They have roughly the same cost implications.