This paper develops and discusses a Proxy Means Test (PMT) based
household targeting system for Bangladesh. The PMT model derived from
household survey data includes observable and verifiable characteristics on
(i) household demographics and characteristics of household head; (ii)
ownership of assets; (iii) housing quality, and access to facilities and
remittances; and (iv) location variables in a formal algorithm to proxy
household welfare. Simulations of the model suggest that the proposed PMT
formula is able to improve the targeting efficiency by a considerable amount
when compared with existing targeted safety net programmes. However,
numerous implementation challenges remain which include but are not
limited to a cost-efficient data collection process, effective management of
information and a feasible and cost-efficient monitoring and verification
system to minimise fraud and leakage.