Assets and Access Poverty

Poverty is more than a lack of income. It is a deprivation of and lack of access to essential assets. These assets fall into the categories of human capital, physical capital, natural capital, financial capital, and social capital. The idea is to start thinking about poverty as deprivation of these essential assets, and to highlight the role poverty reduction role to be played by improving access.[adb.org]

Human Capital

Human capital is defined as the skill, knowledge, and good health that together allow people to work and earn a living. The two most important human capital investments are in education and health. Human capital expands the opportunities and choices people have, and this in turn can impact economic growth. The WHO (World Health Organization) Commission on Macroeconomics and Health confirms the link between human capital and macroeconomic performance. Empirical evidence bears out that countries with the weakest conditions of health and education have a much more difficult time achieving sustained growth than do countries with better conditions of health and education (WHO, 2001).

Physical Capital

Physical capital comprises the basic infrastructure and services that help to keep people out of poverty. Essential infrastructure and services include access to roads and affordable transportation, adequate shelter/housing, potable water supply and sanitation, affordable energy, and communications. The lack of these types of infrastructure is a core dimension of poverty. Without adequate access to services such as water and energy, health can deteriorate and people are forced to spend more time in nonproductive activities like collecting water and fuel wood. Without access to affordable transportation, the poor might opt to keep their children at home rather than send them to school. This in turn prevents human capital formation and perpetuates poverty.

Financial Capital

Financial capital denotes the financial resources that people are able to access. DFID (Department of International Development) defines two main sources of financial capital: available stocks (such as savings, or credit) and regular inflows (the most common types, aside from wage earnings, are pensions and other transfers from the state, and remittances) Financial capital is thought to be the most versatile of the five categories of assets, since it can be turned into other types of capital, but it is also the asset that tends to be least available to the poor (DFID, 1999). Increased access to financial capital for the poor can be supported in a number of ways.












Natural Capital

Natural capital comprises a variety of resources, from intangible public goods such as the atmosphere and biodiversity to divisible assets used directly for production. As explained by DFID (1999) the relationship between natural capital and vulnerability to poverty is particularly pronounced. Many of the shocks that devastate the livelihoods of the poor are processes that destroy natural capital, such as fires that destroy forests, or floods that destroy agricultural land. Natural capital is particularly significant to those who derive all or even part of their livelihoods from resource-based activities, like farming, fishing, and so on. But it is vital for everyone – health and therefore human capital are compromised in areas where air quality is poor.

Social Capital

Social capital comprises the social resources upon which people are able to draw. These social resources are developed through networks and connectedness, membership of groups and organizations, and relationships of trust, reciprocity, and exchanges that facilitate cooperation and can provide informal safety nets among the poor (DFID, 1999). Social capital is based on relationships. As Portes (1998) defines it: social capital stands for the ability of actors to secure benefits by virtue of membership in social networks or other social structures”. Portes clarifies the distinction between social and other forms of capital. “Whereas economic capital is in people’s bank accounts and human capital is inside their heads, social capital inheres in the structure of their relationships. To possess social capital, a person must be related to others, and it is these others, not himself, who are the actual source of his or her advantage.” Participation is a key ingredient of social capital.

Participation—involving people in decision-making on issues that directly affect them—builds social capital, and social capital stocks directly improve people’s welfare. This has been empirically demonstrated by Grootaert (2002) who studied social capital and poverty in Indonesia to conclude that membership of local associations correlates positively with household welfare. Main findings included that social capital reduces the probability of being poor and that the returns to household investment in social capital are higher for the poor than for the population as a whole. There is thus a high potential pay-off to the poor from participating actively in local associations and creating social capital.