Poverty remains a significant challenge in Malaysia, particularly in Sabah and Sarawak. Despite various income-based poverty intervention programmes, these initiatives often fail to address the multidimensional factors contributing to their limited success. A significant shortcoming of income-based poverty intervention programmes is their restricted emphasis on income and monetary terms as the main criteria for success. This research shifts the focus from monetary resources to a capability-based perspective, drawing from Sen’s capability approach. It examines whether income-based policies genuinely enhance the choices and capabilities of individuals in a poverty alleviation programme, specifically known as an income enhancement programme. Using a qualitative approach, 23 respondents from Sabah and Sarawak were interviewed through purposive sampling, considering that these states have a higher incidence of poverty. Thematic analysis identified three key themes: ease of economic activity, limited functionality, and sustaining but not scaling. The findings indicate that while distributed assets temporarily expand immediate capabilities, deeply entrenched personal, social, and environmental conversion factors trap recipients in a state of limited achieved functioning. Thus, the programme provides short-term financial relief but fails to ensure long-term economic mobility. This study underscores the need for a holistic poverty alleviation strategy, incorporating financial inclusion, skills development, and tailored support based on individual and occupational needs. Future research should deploy longitudinal frameworks to track how long-term exposure to restrictive environmental conversion factors perpetuates the 'empowerment dilemma' among rural B40 households, while evaluating the systemic effectiveness of capability-enhancing governance across different isolated geographical settings.