Tuesday, October 16, 2012

Kiva Innovations: How you can change the world -- one land title at a time

By 2030, it’s predicted that 2 billion people around the world will live in slums -- double the current number, and over 25% of the planet's population today.

Slum dwellers face many problems, as we’ve highlighted in a previous post on sanitation conditions in slums. But one of their greatest challenges is land ownership. Very few people living in slums are able to obtain titles to their land. And when families don’t have formal land titles, they're subjected to constant threats of eviction, bribes and worse.

In addition to slum dwellers, the vast majority of the rural poor in developing countries are also untitled. This leaves rural farmers extremely vulnerable. They can be stripped of both their homes and sources of income in one fell swoop, oftentimes with very little notice.

Land ownership is not only about credit and capital. It's also a matter of security and pride.

How do formal land titles help the poor? 

One of the strongest arguments for expanded property rights comes from a Peruvian economist, Hernando de Soto. According to de Soto, secure property rights transform property from “dead capital” into a resource that can be used to generate additional capital and obtain credit. 

"Because [people living outside the legal economy] lack property rights, they cannot access capital or credit, so they cannot grow their businesses," he writes. "Without a legal framework, the market system fails."

To get Kiva's perspective on the issue, I went to Portfolio Manager Claudine Emeott, who summarized it aptly: “In the best case scenario, secure property rights can provide poor people with valuable collateral. In the worst case scenario, insecure property rights make poor people extremely vulnerable and can leave them with virtually no assets if they are forcibly removed from their land and homes.”

Land titles can also translate into higher productivity and less child labor. In an important study on property rights, Erica Field looked at the impact of a program in Peru that provided property titles to over 1.2 million urban households. She found that titling results in a significant increase in the number of hours that people work and a sharp decrease in child labor. She hypothesized that because holding a formal title led to lower risk of land appropriation, adult workers didn’t have to stay at home to protect their land. As a result, adult workers could spend more time working outside of the home, reducing the need for children to work.

The list of positive benefits goes on. A formal titling process also often means that an area is officially mapped, which provides residents with an official address. Having a concrete address enables individuals to fill out forms, submit job applications, open bank accounts and more.

Land Tenure from Sub-Saharan Africa to Cambodia and Brazil

Unfortunately, unsecured property rights are a global issue.

In Sub-Saharan Africa, up to 90% of land is untitled. According to many African countries’ land laws -- which have remained largely unchanged from colonial times -- untitled land legally belongs to the government to dispose of at will.

This has allowed African governments to sell off large chunks of land to investors without residents' consent. On top of that, governments have forcibly evicted tenants with little or no compensation. While some countries have adopted reforms that acknowledge customarily held lands as private property, there's still a long way to go.

These issues are commonplace in other regions too. In Cambodia, all land titles were destroyed by the Khmer Rouge. As a result, the Cambodian government claimed ownership of much of the land when it came into power. In 2001, the government passed laws that allowed for it to take any “private state land” and sell it to investors. Since the passage of this law, more and more Cambodians have been forcibly dispossessed from their land as the government takes advantage of higher property prices.

Tith Srey Mom and her sister are among the thousands of people bearing the brunt of these policies. They own a 200-square-meter plot of land in Chrolang Village, which their grandparents had taken control of in 1979 as the Khmer Rouge were retreating. They used the land to grow rice to subsidize their income, but in 2002, the police arrived and told them that they had to leave. They recently lost a 10-year legal battle for formal ownership, and are waiting to be removed from their land.

Still, the world is not all gloom and doom. In places like Rio de Janeiro, the government -- in partnership with human rights groups -- recently kicked off a big push to provide legal titles to thousands of residents in shantytowns. 

For people like Jose Braga, this is a welcome relief. He has spent his life building his shack into a three-story building, of which two floors are used as a residence and one floor houses a paper-goods store and a restaurant. The building is Braga’s nest egg, and he can now have peace of mind that he won’t lose his property.

The manager of the land titling program, Luiz Claudio Vieira, highlighted the significance of this initiative.

"Bringing families into the formal city is a great benefit for Rio," he says. "You integrate the community into the city, you put thousands of homes on the formal market, you take the residents out of the shadows, give them an address. This property starts to exist for legal and credit purposes."

Brazil still has a long road ahead of it, and the article linked above highlights some of the drawbacks of land titling programs. But progress is underway. 

See how land ownership has made an incredible difference for Kiva Borrower Abu Bakaar in Sierra Leone.

Kiva’s Response

Kiva wants to help bridge the disconnect between the proven positive impact that land titles can make and the hundreds of millions of people living without them.

Kiva is excited to work with organizations that are providing affordable housing with formal land titles to former slum dwellers. You’ll soon have the opportunity to be a part of this exciting partnership by helping to fund micro-mortgages through our website.

Stay tuned for more on micro-mortgages and an official partner announcement! In the meantime, if you are innovating in affordable housing and land titling, we welcome you to learn more about becoming a strategic partner and apply here.

Rebekah Chang is an intern for Kiva’s Strategic Initiatives team, looking for new partners and loan products to extend opportunities and access to more people around the world. Rebekah has an M.A. in Development Economics and Conflict Management from Johns Hopkins University School of Advanced International Studies. Send her your feedback on this blog series at blog@kiva.org.

This is part of a larger series on Kiva’s strategic initiatives and innovative loan products, which are designed to expand opportunities for more borrowers across the globe.