In the foothills of the Mbaracayu Forest Reserve in eastern Paraguay lies the city of Curuguaty, population 75,000. Celia Alfonzo, a resident of the city, is a hard-working woman who was able to improve her family’s living conditions using an approach called the Poverty Stoplight.

Celia was chosen by fellow members of her village banking group to enter Fundación Paraguaya’s “My Bathroom, My Kitchen, My Pride” competition and transform her kitchen. Celia used to cook on her dirt floor, but with the encouragement and assistance of her village bank she built a new, roofed kitchen area with an elevated stove. In the process she built up her own self-pride as well. She now cooks without the risk of contamination from the floor or from domestic animals walking around, with enough ventilation and free from smoke.

Poverty Stoplight: A customized poverty elimination plan

This change in habit and culture is thanks to the Poverty Stoplight methodology, a personalized coaching and mentoring program that helps poor families identify and overcome poverty. It uses a fast, practical visual survey to help families easily measure their poverty, and helps them design and implement a poverty elimination plan based on their motivation and skills.

It was designed in 2011 by Fundación Paraguaya, a social enterprise that has worked in Latin America and Africa for 30 years, after realizing that many of its microfinance clients remained below the poverty line despite access to credit.

For many years Fundación Paraguaya had tracked only inputs – such as loans disbursed and training hours – and outputs, like the number of poor women reached, number of village banks created, and the size of the loan portfolio. It did not measure outcomes – the effect of its microfinance program on its clients’ lives – or impact, whether or not the program was responsible for clients’ improved standard of living.

The outcomes of the Poverty Stoplight methodology are dramatic indeed. Aunty Dolly Nomfusi, a participant of the Poverty Stoplight program in South Africa said: “I was a failure. I had given in to alcohol. I had failed myself. When I began the Poverty Stoplight program I learned how to not give up anymore. I had never thought, for example, that at my age I would have a calculator and an accounting book in my hand!”

Fundación Paraguaya realized that poverty is not only about insufficient income but also about deprivations across multiple dimensions. It found that there are profound structural and systemic causes that are intertwined with individual behavior and culture. In order to overcome multidimensional poverty, families need to become aware and take stock of their situations.

At the same time, basic government services and economic opportunities must be available. The Fundación set out to design an integrated approach that facilitates poverty elimination, by providing a both a metric and a methodology for families to quantify their level of poverty and identify customized strategies to address specific deprivations.

Operationalizing poverty

In order to move to this more holistic approach, Fundación Paraguaya defined what non-poverty means across six dimensions – income and employment, health and environment, housing and infrastructure, education and culture, organization and participation, and interiority and motivation. Working with its clients in rural villages and urban slums, these dimensions were operationalized into 50 indicators, each with three simple definitions: what it means in the local context to be extremely poor (red), poor (yellow) and non-poor (green).

Thanks to a visual survey developed with Hewlett-Packard, the categories are visualized through pictures, so that people who take the survey can diagnose their level of poverty by selecting the picture that best represents their situation. For example, having to fetch water from the contaminated river is considered extremely poor, bringing water from a well away from the house is poor, and having at least one water faucet in the house is considered non-poor. The colors red, yellow and green are used to illustrate the family´s “heat map”.

The Poverty Stoplight is so simple and easy to use that young students can apply it to their own families. In 2014 we launched our first “Poverty Stoplight Olympics” in Fundación Paraguaya’s self-sustaining schools, challenging students to attain “green” status in five indicators.

A female student said after the competition: “This is useful for me and my whole family so we can see at what level we are and what we need to improve on. It’s very new for all of us. We now know that we need a change, we need savings and medical insurance.”

More than 20,000 families overcome poverty

Fundación Paraguaya developed a menu of 50 interventions to improve each specific indicator, ranging from direct activities (such as focused lending and business plan coaching) to indirect activities (such as teaching poor women how to demand services from government agencies). This allows its staff to work together with beneficiaries to develop a personalized plan for each participating family. Working with partners such as Ushahidi, Fundación Paraguaya also georeferences households in slums and villages on a Google map.

Four years after abandoning its former minimalist financial-inclusion approach and embracing a fully integrated methodology that seeks poverty elimination – not just poverty reduction – 20,000 families have overcome income poverty in Paraguay. Some 2,300 families have escaped poverty as measured by all 50 indicators.

In Paraguay regional governments and private companies wishing to go beyond traditional corporate social responsibility approaches are adopting the Poverty Stoplight. Internationally, organizations from 20 countries in Latin America, Africa and Asia are adapting the poverty indicators and finding solutions suited to local contexts.

María José Cosp, the manager of one of the “Companies Without Poverty” programs in Paraguay, shared her experience implementing the Poverty Stoplight with employees: “For us, to be a part of ‘Companies Without Poverty’ is a privilege and a beautiful way of honoring and giving a sense to the work we do. It is affirming ourselves in the win-win spirit, because the company wins, the community wins, the country wins – we all win!”