# **3. CONCLUSION**

The **asset-based approach** is an appropriate conceptual framework for organizing thinking about poor rural households in Central America, and for identifying drivers of poverty-reducing growth. The asset-based approach considers linkages between households’ portfolios of productive, social and locational **assets** , the policy, institutional and risk **context** , their **behavior** as expressed in their **livelihood strategies** , and outcomes in terms of **well-being** . For economic growth to be poverty reducing in a sustainable manner, it is critical to have a better understanding of poor households’ asset portfolios, and how assets interact with the context to influence the selection of livelihood strategies which, in turn, determine well-being.

The focus on assets is appropriate given historically stark inequalities in the distribution of productive assets among households and geographical areas in Central America. Such inequalities are likely to constrain how the poor share in the benefits of growth, even under appropriate policy regimes. Because of these inequalities, policy and market-based reforms alone cannot _quickly_ level the playing field between the asset poor and those who possess the complementary assets necessary to exploit economic opportunities.

Instead of trying to identify particular enterprises (such as cut flowers, broccoli, or snow peas) or sub-sectors (crop, livestock, forestry) that might stimulate growth and poverty reduction, it is suggested that an analysis of the _quantity, quality, and productivity of assets_ needed by different household types in different geographical areas to exercise their potential for generating long-term growth and improving well-being. The focus on assets can also help delineate public and private roles in building and strengthening asset bases.

Thus, it is suggested that **drivers of growth** be defined as _the assets and combinations of assets_ needed by _different types of households in different geographical areas_ to take advantage of economic opportunities and improve their well-being over time. It is important to examine the relative contributions of these assets, and identify the combinations of productive, social, and location-specific assets that help poor households take advantage of prospects for poverty-reducing growth. By examining the role of assets in achieving development objectives, it is possible to direct policy reforms and investments in a manner that has sustainable impacts on poverty reduction.

Policy reforms can change the context and income-generating potential of assets. Investments can add new assets or increase the efficiency of existing household assets, and also improve households’ risk management capacity. Investment priorities and project design influence (and are influenced by) the sequencing and complementarity of changes in the asset portfolio. After all is said and done, a household’s asset portfolio will determine whether growth and poverty reduction can be achieved, and sustained over time.

The asset-based framework is amenable to different analytical techniques. It is suggested to combine quantitative and qualitative spatial and household level analyses (and linked 17