The livelihoods approach is concerned first and foremost with people.  It seeks to gain an accurate and realistic understanding of people’s strengths (assets or capital endowments) and how they endeavour to convert these into positive livelihood outcomes. The approach is founded on a belief that people require a range of assets to achieve positive livelihood outcomes; no single category of assets on its own is sufficient to yield all the many and varied livelihood outcomes that people seek. This is particularly true for poor people whose access to any given category of assets tends to be very limited. As a result they have to seek ways of nurturing and combining what assets they do have in innovative ways to ensure survival.

The Asset Pentagon

For further description and explanation of the individual assets click on the relevant capital below:

• Financial capital

• Human capital

• Natural capital 

• Physical capital

• Social capital

The shape of the pentagon can be used to show schematically the variation in people’s access to assets. The idea is that the centre point of the pentagon, where the lines meet, represents zero access to assets while the outer perimeter represents maximum access to assets. On this basis different shaped pentagons can be drawn for different communities or social groups within communities.

It is important to note that a single physical asset can generate multiple benefits. If someone has secure access to land (natural capital) they may also be well-endowed with financial capital, as they are able to use the land not only for direct productive activities but also as collateral for loans. Similarly, livestock may generate social capital (prestige and connectedness to the community) for owners while at the same time being used as productive physical capital (think of animal traction) and remaining, in itself, as natural capital. In order to develop an understanding of these complex relationships it is necessary to look beyond the assets themselves, to think about prevailing cultural practices and the types of structures and processes that ‘transform’ assets into livelihood outcomes.

Pentagons can be useful as a focus point for debate about suitable entry points, how these will serve the needs of different social groups and likely trade-offs between different assets. However, using the pentagon in this way is necessarily representative. At a generic level there is no suggestion that we can or should quantify all assets, let alone develop some kind of common currency that allows direct comparison between assets. This does not, of course, rule out the development of specific, quantifiable indicators of assets where these are thought to be useful.

INSIGHT

The livelihood framework identifies five core asset categories or types of capital upon which livelihoods are built. Increasing access which can take the form of ownership or the right to use to these assets is a primary concern for DFID in its support of livelihoods and poverty elimination. Although the term ‘capital’ is used, not all the assets are capital stocks in the strict economic sense of the term (in which capital is the product of investment which yields a flow of benefits over time). The five capitals are perhaps best thought of as livelihood building blocks; the term ‘capital’ is used because this is the common designation in the literature.

Change in Asset Status

Asset endowments are constantly changing, therefore pentagons are constantly shifting. A three dimensional framework, with the third dimension representing time, would enable this change to be visualised. A two dimensional framework does not. However, it is imperative to incorporate a time dimension into any analysis of assets. Information should be gathered on trends in overall asset availability (e.g. if societies fragment, the overall ‘stock’ of social capital might decline) as well as on which groups are accumulating assets, which are losing and why. Where processes of ‘social exclusion’ are at work, those who are already poorly endowed with assets may well be becoming gradually, but notably, more marginalised.

Relationships within the Framework

Relationships between assets

Assets combine in a multitude of different ways to generate positive livelihood outcomes. Two types of relationship are particularly important:

Sequencing: Do those who escape from poverty tend to start with a particular combination of assets? Is access to one type of asset (or a recognisable sub-set of assets) either necessary or sufficient for escape from poverty? If so, this may provide important guidance on where livelihood support should be focused, at least at the outset.

Substitution: Can one type of capital be substituted for others? For example, can increased human capital compensate for a lack of financial capital in any given circumstance? If so, this may extend the options for support.

Relationships with other framework components

Relationships within the framework are highly complex. Understanding them is a major challenge of, and a core step in, the process of livelihoods analysis leading to action to eliminate poverty.

Assets and the Vulnerability Context: assets are both destroyed and created as a result of the trends, shocks and seasonality of the Vulnerability Context. 

Assets and Policy, Institutions and Processes:These have a profound influence on access to assets. They:

Create assets e.g. government policy to invest in basic infrastructure (physical capital) or technology generation (yielding human capital) or the existence of local institutions that reinforce social capital.

Determine access e.g. ownership rights, institutions regulating access to common resources.

Influence rates of asset accumulation e.g. policies that affect returns to different livelihood strategies, taxation, etc.

However, this is not a simple one way relationship. Individuals and groups themselves influence Policy, Institutions and Processes. Generally speaking the greater people’s asset endowment, the more influence they can exert. Hence one way to achieve empowerment may be to support people to build up their assets.

Assets and Livelihood Strategies:  Those with more assets tend to have a greater range of options and an ability to switch between multiple strategies to secure their livelihoods.

Assets and Livelihood Outcomes:  Poverty analyses have shown that people’s ability to escape from poverty is critically dependent upon their access to assets. Different assets are required to achieve different livelihood outcomes.  For example, some people may consider a minimum level of social capital to be essential if they are to achieve a sense of well-being. Or in a remote rural area, people may feel they require a certain level of access to natural capital to provide security. Such relationships will need to be investigated case by case.