snow peas or sub-sectors that might stimulate growth and poverty reduction. Instead our approach can be useful to understand the type and combination of assets that are required by households to take advantage of a particular enterprise or development path.

# **2.1 Components of the Asset-Based Approach**

A household’s **_assets_** consist of the stock of productive, social, and locational resources used to generate well-being (see Moser 1998; Siegel and Alwang 1999; Rakodi 1999; Carney and others 1999; de Janvry and Sadoulet 2001).<sup>12</sup> Household assets are broadly defined to include tangible and intangible resources drawn from individual, household, community, and national and global levels (see Annex 1). According to the asset-based <u>approach, the poor are “asset-poor”; they have limited assets, hold assets with low returns, and/or are unable to exploit their assets effectively</u> (see box 2.1).

## **Box 2.1 Assets and the Rural Poor**

“Poor people in Latin America are poor because the market value of their assets is low and because opportunities to augment these assets continue to be low as well. In addition, the poor are often at a disadvantage with respect to the rate and variability of return on these assets, which helps explain their low market rate. What needs to be done to provide the rural poor with increased access to assets and to provide them with opportunities for sustainable increases in their returns to these? Different approaches are required to address the existing heterogeneity in asset endowments and the many factors that affect access and returns with a specific geographic setting of the population being targeted. In broad terms, these factors include the rules of trade, market access, technology, governance, and economic and environmental shock (USAID 2002 p.32).” Household assets include tangible assets such as land and other natural assets, specific agro-ecological conditions, equipment and other physical assets, livestock, housing, financial assets, human capital (education, skills, health and nutritional status) and household composition. Intangible assets are also important, such as social capital and political rights (the degree of inclusion/exclusion), and the capacity and openness of institutions. In addition, community and regional assets such as infrastructure (roads, communication, markets), educational and heath infrastructure, location and access to infrastructure and services affect households’ livelihood opportunities and returns on other assets.

Most economic analyses focus on productive tangible assets and how they generate returns. One reason is that data for tangible assets are more easily collected and available. However, there is growing consensus that both tangible and intangible assets, and their interplay, are important, especially in the context of risk management of vulnerable households. As noted by Narayan and Pritchett (1997), poverty analyses that focus exclusively on tangible household assets miss a large part of the “poverty puzzle”, by ignoring the community and social context. See box 2.2.

> 12 Also see World Bank 2000; Attanasio and Szekeley 2001; Wadsworth 2002; Winters and others 2002).

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