Arises when low incomes result in low/zero savings, allowing only low investment in capital leading to low productivity of labour and land. Therefore, there will be low income growth (perhaps even none), once again resulting in low incomes.

Poverty cycles may occur in families, communities, part of the economy or the economy as a whole.

People cannot afford necessary medical care for themselves or their children or cannot afford enough food.

People have large families because they see children as a source of additional income or old age support. Large families increase poverty since income is stretched to cover the needs of more people.

Requires intervention from the government to undertake investments; Unless the government is caught in the poverty cycle in which case escape is possible if resources are provided through foreign aid.