Is Land Titling in Sub-Saharan Africa Cost-Effective? Evidence from Madagascar Hanan Jacoby, DECRG Bart Minten, Cornell University

Land Titling in SSA Evidence from Asia and Latin America suggests that formalization of land ownership can deliver large gains in farm productivity. Evidence from Asia and Latin America suggests that formalization of land ownership can deliver large gains in farm productivity. Titling is more attractive where indigenous tenure is weak, where return on investment in land is high, and where collateralized lending is prevalent, none of which apply to most of SSA. Titling is more attractive where indigenous tenure is weak, where return on investment in land is high, and where collateralized lending is prevalent, none of which apply to most of SSA. Should land registration and titling be promoted in SSA? More precisely, what cost is too high? Should land registration and titling be promoted in SSA? More precisely, what cost is too high?

Land Tenure in Madagascar Colonial legacy of Torrens title deed system. State guarantees title, but system is expensive, lack of capacity and resources to maintain  Very limited coverage Colonial legacy of Torrens title deed system. State guarantees title, but system is expensive, lack of capacity and resources to maintain  Very limited coverage Widespread informal system (petits papiers) recognizes tenure in community. Offers little protection from outsiders. Widespread informal system (petits papiers) recognizes tenure in community. Offers little protection from outsiders. Several donor funded pilots now underway (guichets fonciere) “one-stop shop” for community-based land registration. Will these have a significant impact on land productivity? Several donor funded pilots now underway (guichets fonciere) “one-stop shop” for community-based land registration. Will these have a significant impact on land productivity?

Lac Alaotra The “rice-basket” of Madagascar: 30 k ha under modern irrigation, 72 k ha under traditional irrigation. The “rice-basket” of Madagascar: 30 k ha under modern irrigation, 72 k ha under traditional irrigation. Modern irrigated perimeters (mailles) around the lake are most productive rice growing area. Modern irrigated perimeters (mailles) around the lake are most productive rice growing area. Mailles intensively titled to protect French colonial interests. Post-colonial administration (SOMALAC) continued to facilitate titling. Mailles intensively titled to protect French colonial interests. Post-colonial administration (SOMALAC) continued to facilitate titling. But many plots within the mailles remain untitled to this day for a variety of reasons. But many plots within the mailles remain untitled to this day for a variety of reasons.

Data and Sampling Specially designed survey covering 1700 landowning households in 38 communes around Lac Alaotra in April-May Specially designed survey covering 1700 landowning households in 38 communes around Lac Alaotra in April-May Phase 1: 900 hhs from 29 communes outside mailles. Phase 2: 800 hhs from 9 communes within the mailles. Phase 1: 900 hhs from 29 communes outside mailles. Phase 2: 800 hhs from 9 communes within the mailles. Survey covered land documentation, farm production, investment, etc. on lowlands (rice plots), uplands, and forest plots. Survey covered land documentation, farm production, investment, etc. on lowlands (rice plots), uplands, and forest plots. We have data on 3,232 rice plots owned by 1,604 households. We have data on 3,232 rice plots owned by 1,604 households.

Rice Plot Productivity Type of rice plot % of plots TitledYieldNet Revenue/haValue/ha % of plots % of area medianmean (s.d.) medianmean (s.d.) medianmean (s.d.) maille (1.16) (261) (527) non- maille (1.39) (303) (519) Total (1.38) (299) (560) Note: Monetary values in USD.

Informal Tenure: Petits Papiers Individualized tenure. Ownership claims legitimized by communal institutions with varying degrees of formality. Individualized tenure. Ownership claims legitimized by communal institutions with varying degrees of formality. Petits papiers (“little papers”) depend on mode of plot acquisition. Petits papiers (“little papers”) depend on mode of plot acquisition. Most land sales are certified by village head (40% of rice plots purchased). Most land sales are certified by village head (40% of rice plots purchased). Many inherited plots also have documents. Many inherited plots also have documents.

Investment in Rice Plots Initial clearing: little unexploited lowlands remaining in Lac Alaotra. Initial clearing: little unexploited lowlands remaining in Lac Alaotra. New plot infrastructure: irrigation and drainage canals, protective bunds, land leveling. Mostly already exists. New plot infrastructure: irrigation and drainage canals, protective bunds, land leveling. Mostly already exists. Maintenance of existing infrastructure. Low expenditure & high frequency  most investment is recurrent. Maintenance of existing infrastructure. Low expenditure & high frequency  most investment is recurrent.

Investment in Rice Plots in Last Five Years Type of rice plot Irrigation / drainage canal Protective bundsLand levelingAll investments % plotsmean (s.d.) % plotsmean (s.d.) % plotsmean (s.d.) % plotsmean (s.d.) Maille 9117 (38) 4612 (76) 1810 (85) 9439 (188) non- maille 7525 (47) 4015 (41) 3216 (54) 8556 (102) Total8221 (44) 4313 (60) 2513 (70) 8948 (147) Note: Monetary values in USD/ha

Potential Benefits of Land Titles Assurance against expropriation: 90% of farmers in Lac Alaotra see this as chief benefit (6% say title facilitates bequests, which may amount to the same thing). Assurance against expropriation: 90% of farmers in Lac Alaotra see this as chief benefit (6% say title facilitates bequests, which may amount to the same thing). Facilitates land transactions  improves allocative efficiency and realizability of investments. Facilitates land transactions  improves allocative efficiency and realizability of investments. Allows land to be used as collateral  improves access to credit. Allows land to be used as collateral  improves access to credit.

Titles in the Land Market Titles provide transaction insurance: Prove land belongs to the seller and assures the buyer that land has not been sold to someone else. Titles provide transaction insurance: Prove land belongs to the seller and assures the buyer that land has not been sold to someone else. But transferring title is expensive  Limited market for titled land. Evidence: Inherited land less likely to have up-to-date title; titled land less likely to be sold outside immediate family. But transferring title is expensive  Limited market for titled land. Evidence: Inherited land less likely to have up-to-date title; titled land less likely to be sold outside immediate family. Leasing Market: Titled land is no more likely to be leased out than untitled land  negligible risk of tenant expropriation. Leasing Market: Titled land is no more likely to be leased out than untitled land  negligible risk of tenant expropriation.

Titles in the Credit Market 14% of surveyed households took formal sector loan in last 3 yrs (much higher than national rate), but mostly from NGO-run institutions. 14% of surveyed households took formal sector loan in last 3 yrs (much higher than national rate), but mostly from NGO-run institutions. Rate of formal borrowing no higher among those owning titled land. Rate of formal borrowing no higher among those owning titled land. Also, titled plots are no more likely to be used as collateral for formal loans than are untitled plots of equivalent size. Also, titled plots are no more likely to be used as collateral for formal loans than are untitled plots of equivalent size.

Effects of Titles on Recurrent Investments in Land Independent variable Irrigation / drainage canal Protective bundsLand levelingAll investments (a) Any investment Titled plot (0.038) (0.060) (0.121) (0.032) Up-to-date title (0.042) (0.066) (0.133) (0.036) Out-of-date title0.017 (0.052) (0.082) (0.165) (0.044) (b) Investment expenditures per hectare Titled plot (0.114) (0.188) (0.271) (0.114) Up-to-date title (0.125) 0.416* (0.206) (0.297) (0.125) Out-of-date title (0.155) (0.255) (0.369) (0.154)

Effect of Titles on Land Productivity and Value (selected coefficients) YieldNet revenue/haLog(value/ha) titled plot * *0.056*0.041* (0.042)(0.025)(0.046)(0.027)(0.024)(0.020) plot in mailles0.292*0.325*0.289*0.318*0.340*0.371* (0.042)(0.025)(0.046)(0.028)(0.024)(0.020) log plot area-0.080*-0.097*-0.080*-0.097*-0.042*-0.034* (0.016)(0.012)(0.018)(0.013)(0.009)(0.008) no irrigation (rainfed) (0.087)(0.054)(0.095)(0.060)(0.047)(0.040) irrigated by river *0.157* (0.103)(0.060)(0.113)(0.067)(0.056)(0.047) quality of irrigation index0.046*0.036*0.051*0.036*0.035*0.042* (0.015)(0.009)(0.017)(0.010)(0.008)(0.007) Household effectsfixedrandomfixedrandomfixedrandom Sample size

Title Status, Land Productivity and Value YieldNet revenue/haLog(value/ha) up-to-date title * (0.046)(0.028)(0.051)(0.032)(0.026)(0.022) out-of-date title * *0.066*0.065* (0.057)(0.033)(0.063)(0.036)(0.032)(0.026) Household effectsfixedrandomfixedrandomfixedrandom Test (p-values): up-to-date=out-of-date

Policy Implications What are the private benefits of having title in Lac Alaotra? No more than $60/ha compared to $1000/ha median plot value. What are the private benefits of having title in Lac Alaotra? No more than $60/ha compared to $1000/ha median plot value. Cost of issuing title in Madagascar has been estimated at $350 per parcel. Median plot size in our sample is 1 ha. Cost of issuing title in Madagascar has been estimated at $350 per parcel. Median plot size in our sample is 1 ha. Thus, the marginal cost of a title has to fall six-fold to make it (just) worthwhile titling the median plot. Thus, the marginal cost of a title has to fall six-fold to make it (just) worthwhile titling the median plot.

Alternatives to Titling Community-based land administration: Will it provide as much tenure security as the centralized modern titling system? Community-based land administration: Will it provide as much tenure security as the centralized modern titling system? If so, then will it justify its costs? If so, then will it justify its costs? Should the current titling system be maintained? Not if it is itself the source of more insecurity than it eliminates. Should the current titling system be maintained? Not if it is itself the source of more insecurity than it eliminates.