Vulnerability refers to clients’ economic or socio-cultural characteristics, which puts them at risk of falling back into poverty and also, their ability to overcome it. It is related to the economic hardship or barriers that prevent them from having financial stability and full social inclusion to promote sustainable development.
Vulnerability is thus a key dimension when the BBVAMF measures its activity. In line with international benchmarks, the Foundation’s analysis looks at two criteria:
- Economical vulnerability. This focuses on entrepreneurs’ business net profits and, as such, on the financial resources available for their households. Given it is a proprietary measure, further detail regarding the methodology is provided below.
- Social vulnerability. Analyzes the characteristics that might condition a person’s fragility such as their level of education, gender, age, etc. as well as the environment in which it conducts its business (since infrastructure and access to certain resources are not always the same).
We measure our client vulnerability based on their business revenues (without taking into account additional incomes) minus business expenses. This surplus is distributed among household’s members to obtain a measure of the income that business generates for each family member.
We analyze this income against the cost of a basic food and services basket that is represented through each country’s poverty line. BBVAMF classifies clients as follows:
- Extremely poor: when the business earnings for each member of the household (income) is below the extreme poverty line in that country.
- Poor: when income is higher than the extreme poverty line, but lower than that country’s poverty line, represented by the cost of the basic basket of food, goods and basic services.
- Vulnerable: when income is above the poverty line, but less than three multiples of that country’s poverty line
- Others: when income is more than three times that country’s poverty line.
Clients who are in a situation of vulnerability are all those who have an income below 3 times the poverty line, that is, 80% of total credit clients.
This classification allows us to recognize how our entrepreneurs’ businesses contribute to their homes, as well as their progress over time. In addition, progress indicators are built in order to measure relative change (e.g. it measures income changes with regards to national poverty lines).