The Small Area Estimation (SAE) ofpoverty in Rural Bhutan was prepared with an objective toprovide a more disaggregated picture of poverty in Bhutandown to the gewog level, based on the Bhutan living standardsurvey 2007 and Population and Housing Census of Bhutan(PHCB) 2005. The report records the estimation process indetail and describes results of statistical tests forquality checks. According to these tests, the povertyestimates at the gewog level are reliable. The report alsoenhances the transparency of the process and intends toserve as a guide for future updates.According to thePoverty Analysis Report (PAR) 2007, about one-fourth of thecountry's population is estimated to be poor with ruralpoverty as high as 30.9 percent. This report, which presentssome results of the SAE, compliments the PAR 2007. However,vast differences in poverty levels across dzongkhag(district) and gewog (sub-district) persist. Popularperceptions suggest that the geography of poverty and ofeconomic affluence is accentuated at the local level, andthat an understanding of the spatial distribution ofeconomic welfare is needed in order to spread the benefitsof growth to lagging regions. In order to fulfillBhutan's development philosophy of gross nationalhappiness, and poverty reduction, it is essential tounderstand its geographic and spatial patterns. In the caseof Bhutan, its land-locked geography and sparse populationpose major challenges for poverty reduction. Poverty mapswill help the government and development partners locatepockets of poverty which might otherwise be overlooked.