Imagine a small rural village in southern Punjab, where Nasreen, a mother of three, struggles daily to make ends meet. Her husband works as a daily-wage agricultural laborer, earning barely enough to feed the family. Despite their hard work, they remain trapped in poverty, generation after generation. Why? It’s not due to laziness or a lack of ambition. Rather, it’s because they lack the productive assets-like livestock, land, or basic agricultural tools-that would allow them to earn sustainably higher incomes.
A groundbreaking study published by MIT economists Clare Balboni, Oriana Bandiera, Robin Burgess, Maitreesh Ghatak, and Anton Heil provides clear evidence of why people remain persistently poor. The answer is startlingly simple yet profound: they are trapped in poverty due to a lack of initial productive assets.
The research, conducted over an 11-year period in Bangladesh, closely mirrors rural conditions in Pakistan. It found that poor households are stuck in low-earning jobs primarily because they cannot afford the productive assets necessary to move into more profitable occupations. The study identified a clear asset threshold-around 9,300 Bangladeshi Taka (approximately PKR 25,000)-above which households were able to sustainably increase their earnings, improve their living conditions, and permanently escape poverty.
The answer is startlingly simple yet profound: people are trapped in poverty due to a lack of initial productive assets.
What does this mean for Pakistan, a country where over 40% of the population remains in poverty? It offers a new perspective for policymakers and poverty-alleviation programs. Historically, Pakistan’s approach to poverty alleviation has involved small, regular payments through initiatives like the Benazir Income Support Programme (BISP) and Ehsaas Program. While valuable in the short term, these payments rarely break the structural cycle of poverty.
Evidence from pilot projects within Pakistan, such as the asset-transfer programs run by the Pakistan Poverty Alleviation Fund (PPAF) in southern Punjab, reinforce the findings from the MIT study. These programs provide rural families with one-time transfers of productive assets, such as cows, goats, or small businesses, accompanied by training and support. The outcomes have been consistently positive: families increase their earnings, diversify their income sources, and become more resilient against economic shocks.
The MIT study further emphasizes that poor households are rarely poor because of innate limitations. Instead, poverty arises primarily from structural constraints-particularly the inability to access and own productive assets. When households receive these assets, most have the skills, motivation, and diligence required to thrive economically.
Asset-transfer programs have also shown remarkable long-term sustainability. Unlike continuous financial aid, which often creates dependency, these programs empower households to transition into productive, asset-based occupations. Over time, beneficiaries not only maintain but increase their asset base, invest in better-quality assets such as land, and significantly improve their quality of life.
This model offers particularly promising outcomes for younger households. Young families have longer productive horizons, meaning they are able to reinvest earnings into further asset accumulation, creating generational change in poverty status. Older recipients, while still benefiting substantially, naturally show less aggressive asset accumulation due to lifecycle factors. Despite these encouraging outcomes, critics often point to the high initial costs of large asset transfers. However, the MIT study’s rigorous economic analysis reveals that the benefits-reduced occupational misallocation, increased productivity, and long-term poverty alleviation-far exceed the upfront investment. The gains in productivity alone are estimated to be up to fifteen times greater than the initial program costs.
Given this compelling evidence, Pakistan’s policymakers should consider shifting towards large-scale, one-time asset transfers aimed explicitly at pushing poor households above the poverty threshold. Such policies must be combined with targeted training, technical assistance, and follow-up support, creating an environment where asset transfers become catalysts for sustained economic growth and social stability. Prioritizing rural communities, particularly in economically vulnerable areas such as southern Punjab, rural Sindh, Baluchistan, and parts of Khyber Pakhtunkhwa, could yield transformative results. By strategically investing in productive assets for young, economically disadvantaged families, Pakistan can break the cycle of intergenerational poverty.
It is time for Pakistan to rethink poverty alleviation strategies. Temporary relief, though important, does not lead to permanent prosperity. Sustainable poverty alleviation requires structural transformation. By empowering families like Nasreen’s with the productive assets they need, Pakistan can unlock the untapped potential of millions, creating lasting economic and social prosperity.
The writer is a public policy researcher.