The approach of community-based development (CBD) is expected to improve targeting and reduce programme costs of poverty reduction policies, besides other positive contributions [Mansuri and Rao (2004)]. 1 Furthermore, the use of local knowledge is expected to bear greater relevance in a situation where credible monetary data for potential use in targeting activities are not available. According to Alatas, et al. (2012), in developing countries—where the majority of potential target group is employed in the informal sector—the availability of verifiable income records is always an issue. Therefore, it is difficult to identify target groups by employing conventional targeting techniques such as means tests. For these reasons, identification through the CBD approach is expected to improve targeting.