# **Box 2.2 The Centrality of Assets for Rural Poverty Reduction, IFAD (2002, p.2):**

“IFAD’s _Rural Poverty Report 2001_ (IFAD 2001) states that increasing access to assets is crucial for broad-based growth and poverty reduction. Assets take many forms – human and social (education, health, organizations), natural (land, water and forests), technological (farm production, processing and marketing materials), infrastructural (roads, communications, health and education facilities, housing) and financial (crop sales and off-farm revenue, investment and working capital, “savings” in the form of livestock and stored commodities). There is strong complementarity among assets categories. For example, building social capital by strengthening farmers’ groups and improving road and communications networks can enhance the financial asset base. Secure land use rights can allow farmers to invest in technology, leading to higher farm productivity. They may then invest in improved health and nutrition and their children’s education.” (emphasis by author) More attention is now being placed on social, institutional and political relationships among households within and outside the community; such as gender relations, social ties and networks, social cohesion, empowerment, participation in organizations, and effectiveness of collective action (Moser 1998; World Bank 2002c). Physical and social infrastructure complement other assets and help determine the expected returns and the risks of these other assets. In addition, the location (e.g., proximity or distance) of infrastructure is considered to be a critical asset, because it influences the availability and accessibility (e.g., transaction costs) of goods and services (van de Walle 2000a; 2000b). Obtaining and analyzing data on this range of parameters is a major challenge for researchers and will require investments in data collection and analysis.

There is considerable heterogeneity of households’ assets and livelihood strategies in rural areas of Central America. Differences in agro-ecological conditions have an important impact on opportunities and constraints for rural households, because they determine, to a large extent, the potential for agricultural and activities linked to agriculture, and the environmental impacts of these activities (FAO 2001). In many cases, agro-ecological zones are also highly correlated with other assets at the household, community and regional levels (see table 2). Areas with low agricultural potential and located in environmentally sensitive zones often have relatively higher proportions of indigenous populations and higher poverty rates, and/or constraints on income generating potential from assets because of high transaction costs related to remoteness (Pichon and Uquillas 1999; FAO 2001; World Bank 2002c; Wadsworth 2002).<sup>13</sup> See box 2.3.

> 13 Notwithstanding the forward-looking character of this study, it is also critical that the **_historical context_** not be ignored.  That is, the location of poor households, their assets and assets at the community and local levels have been shaped by history.  For example, the pervasiveness of rural poverty in the Central American countries and the location of poor rural households is largely the result of historical factors (see for example, de Janvry and Sadoulet 2000; Attanasio and Szekeley 2001; Morley 2001; Franko 2003; Plataforma Agraria 2003; World Bank 2002c).

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