The Significance of Capital Assets in Moving Out of Poverty

Abstract

This article investigates the importance of capital assets in moving out of poverty by reviewing the Samurdhi (Prosperity) Development Programme (SDP) implemented to eradicate poverty of Sri Lanka in 1995. One hundred and seventy beneficiaries from a randomly selected sample of the Ratnapura district were categorized into five poverty levels: extreme poor, poor, vulnerable non-poor, viable and sustainable households based on subjective range of income differences around two official poverty lines of the district for 1995 and 2009. A transition matrix estimated to examine households’ possible movements between these five poverty levels during 1995–2009 confirmed that the net impact of the poverty reduction initiatives of the SDP is highly questionable. However, the results of two multinomial logistic regressions estimated to investigate the relationship between a household’s ability to move out of poverty and the growth of its capital assets confirmed that there is a higher probability for a household to get out of poverty when its assets base is developed. A main policy message is that it is imperative for the SDP to reassessing and reformulating its policy strategies to strengthen assets base of beneficiaries of the programme in order to alleviate poverty.