8.2.4—Poverty trap

A poverty trap is a self-reinforcing cycle in which low income limits saving, health, education or investment, which keeps productivity and future income low.

The cycle is a mechanism, not a claim that every low-income household is unable to escape. Credit constraints, risk, poor infrastructure and unequal access can prevent a profitable investment from being made.

A farmer without affordable credit cannot buy irrigation; low yields keep income low, so the next season the same constraint remains. A targeted loan or infrastructure can break the cycle if it reaches the binding constraint.

The trap is not simply “people are poor because they do not work”; identify the missing asset, market or opportunity that reproduces poverty.