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Context: Good quality, timely and accurate statistics lie at the heart of a country's effort to improve development effectiveness. As a response to the challenge of measuring the institutional capacity of a country in producing timely and accurate statistics, the World Bank developed its framework for the Statistical Capacity Index (SCI). Although the World Bank's framework is acknowledged for its simplistic approach, it has received extensive critique for the ad-hoc allocation of weights. This research attempts to find a solution to this criticism using a statistical methodology. Country information used by the World Bank to create the SCI for the year 2014 was considered. The data consisted information on 25 categorical variables out of which 16 were binary variables and 9 were ordinal variables. Nonlinear Principal Component Analysis (NLPCA) was conducted on the categorical data to reduce the observed variables to uncorrelated principal components. Consequently, the optimally scaled variables were used as input for factor analysis with principal component extraction. The results of the factor analysis were used to weight the new SCI. The dimension, availability and periodicity of economic and financial indicators explained most of the variance in the data set. The research proposes a simpler version of the new SCI with only 23 variables. In the proposed new index, the variables enrolment reporting to UNESCO, gender equality in education and primary completion indicators were the three variables receiving the largest weight. These three indicators measure the periodicity of reporting data on educational statistics to UNESCO; periodicity of observing the gross enrolment rate of girls to boys in primary and secondary education; and periodicity of observing the PCR indicator which is the number of children reaching the last year of primary school net of repeaters respectively. This research represents the first attempt to create a SCI using multivariate statistical techniques and especially index construction with NLPCA. The research concluded with a comparison of the proposed new index and the index created by the World Bank, which justified that the proposed index be used as a solution for the arbitrary allocation of weights in creating the SCI.
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