These days through formal and informal ways resources is being mobilized in the name of poor and disadvantaged. But, question has also been raised by the stakeholders regarding the method of targeting as proper identification of the targeted is the major issue. Among several methods PMT has more predictability and less limitation to predict poverty.
Proxy Means Testing (PMT) System
Measuring true welfare using actual consumption or income is very costly and administratively infeasible in developing countries like Nepal with a high degree of informalities in labor markets, in-kind earnings and consumption of home-produced goods.
Among existing targeting systems Proxy Means Testing Method is more scientific alternative targeting scheme for it contains a set of variables that can be relatively easily measured and verified. It is household based targeting method which generates a welfare score for applicant’s household based on a set of observable household characteristics. Variables in the welfare score are determined using a statistical analysis-OLS regression analysis of a detailed survey data on HH welfare such as consumption expenditure. Appropriate variables are chosen through the regression model then cut-off point on the basis of actual per capita consumption for eligibility. Individual applicants in the system will be ranked according to their respective HH predicted welfare scores.
a) Proxy Means Testing (PMT) tool is based on the National Living Standard Survey having few easily verifiable (non-manipulative) proxy indicators;
b) Data collection option used for targeting is self assessment of HH indicators;
c) Selection option used is PMT verifying HH consumption;
d) Indicators used have statistically significant variables;
e) Indicators are easily verifiable and non- manipulative;
f) Especial focus set to ethnic minorities and inhabitants of poorer geographical locations; and
g) Transparency to assure well-enough governance.