1. Jorge A. Muñoz, Sophie Theis & Paul Gardner de Beville
The World Bank’s Experience with Redistributive Land Reform Projects: The Nuts & Bolts
Jorge A. Muñoz, Sophie Theis & Paul Gardner de Beville
(The World Bank)
March 24th, 2015

2. The World Bank’s Support to “Land Reform”
1) Land Administration projects
Objective: To reform legal, institutional, technical framework of land rights, tenure and their administration
How: Through legal recognition, surveying, cadastre, conflict resolution, titling, registration, technical assistance
2) Land Redistribution projects
Objective: To transfer land from large to small farmers
How: By putting beneficiaries in the driver’s seat and decentralizing the decision-making processes (land acquisition, investments and technical assistance)

3. The Case for Redistributive Land Reform
Efficiency:
Inverse farm size-productivity relationship
Equity:
More equitable land distribution associated with higher economic growth and reduced poverty
Social stability:
Land property relations are inherently political

4. Traditional or Classical Land Reform
Farm size limits by law, inefficiency penalized
Centralized government agency:
Designates and expropriates large farms
Selects beneficiaries
Plans settlements and farm activities
Finances infrastructure, services, assistance
Usually only user rights issued
Landlords contest process, price leading to a lengthy and costly process

5. Beneficiary-Driven Land Reform
Beneficiaries self-select themselves
Beneficiaries select farm, negotiate acquisition
Local council verifies eligibility of beneficiaries, of farm (including its price), and investments
Government provides subsidized loan for land
Government provides matching grant to beneficiaries for investments and tech. assistance
Beneficiaries manage funds
Land is titled in name of beneficiary association

6. Intentions of the selection process
What mix of beneficiary group, land, and investments will have the best chance of enabling successful farmers and productive farms?
Beneficiaries should be:
Eligible (income and land caps)
Amongst the eligible landless population, the most committed and capable
Part of a group with strong social capital
Land should be:
High quality, fairly priced land with clear and legal tenure status, meeting beneficiaries’ preferences
Investments should be:
Feasible and viable, given land, skills, and market considerations

7. Community Associations
Selection and verification process in Brazil
Identify, Prepare,
Contract, Manage,
Maintain, Co-finance investment subproject
Community Associations
Manages $
Present project proposal
Project Account
Analyze
Verify eligibility
Approve
Supervise
Municipal Councils
Operating Agreement
Project Implementation Agreement
Authorizes release of $
Supervises MC
Evaluates Project
Monitoring & Evaluation
State Technical Units

8. Variations in the selection process
Projects used different institutions to review beneficiary eligibility, choice of land, and productive investment proposals.
Some important variations:
Local-level councils (Brazil) vs. centralized institutions (Guatemala, Mexico) to verify beneficiaries’ eligibility and land price
Mobilization of applicants (Honduras), sometimes at the expense of self-selection (Guatemala)
Flexible/stringent beneficiary group requirements
Guidance/influence on investment proposals (India vs. Mexico)
Review of investment proposals by private financial institutions (Honduras) vs. public institutions with budget incentives

9. The package of benefits shapes beneficiaries’ behavior
Challenge:
How to give beneficiaries autonomy to choose land, but make sure they negotiate a fair price and do not get excessively into debt?
Two part solution:
Give beneficiaries the means to become sufficiently profitable to repay the loan
Provide incentives for beneficiaries to only take out the amount of credit that they can repay, and repay it!
Key variation across projects:
Financial package, specifically: how the loan and grant components were linked
Credit provision for land only worked if the projects effectively did two things: 1) gave beneficiaries the means to become sufficiently profitable to repay the loan used to purchase the land and 2) ensured beneficiaries had incentives to repay the loan.
Beneficiaries do not have access to credit from traditional lenders, so projects assume this risk and provide concessional loans

10. Financial Package in Brazil: Loan-Grant Link
Loan is only used for land purchase
Total Financial Package
Grant is used for investments and technical assistance
Double-incentive: the more you bargain down the price, the less in debt you are and the more grant you have for other uses.
In contrast to Guatemala
Any part of the financial package not used for the land purchase loan can be used, instead, as a grant.

11. Project Outcomes
Projects
Number of families settled
Total number of farms
Total area distributed (ha)
Average land
size per
family
(ha)
Family Income Increase
Brazil
55,369
2,723
1,230,334
20.7
From RS$ 1,656 to RS$ 4,064
Guatemala
15,487
186
71,361
4.6
No data
Honduras
991
181
2,400
2.4
From $630/yr to $1,430/yr
India
5,303
1,840
0.3
From $488/yr to $1,132/yr
Malawi
15,142
666
33,400
2.2
From MKw 4,530/mth to MKw 30,500/mth
Mexico
10,740 trained
4,526 acquired land
Very different scales (Significant scale in Brazil
Very significant increase in beneficiary income
Reminders:
Exchange rates (ICR): US$1= Mkw 163
India: 124% from 2004 (baseline) to 2009

12. Projects Costs and Debt to Asset Ratios
Average Cost of Land per Hectare
Average Cost of Land per Beneficiary
Financial Package per Beneficiary
Cost of Land (% of the Financial Package)
Debt to Asset ratio
Brazil
$195
$4,058
$8,047
50.4%
1:2.0
Guatemala
$1,017
$4,686
$7,522
62.3%
1:1.6
Honduras
$1,150
$2,780
$7,480 
37.1%
1:2.7
India
$3,479
$1,194
$7,457
16.0%
1:6.2
Malawi
$143
$315
$1,050 (grant) 
30.0%
n/a
Mexico
$1,272
$9,361
$18,000 to $33,000
52.0% -28.4%
1:1.9 1:3.5
Costs of land reform takes $7,000-8,000 per family.
Variation as to how much was given to land vs. on-farm investments (difference in debt to asset ratios)

13. Credit Conditions & Repayment rates
Projects
Loan Amount
Interest Rate
Maturity Period
Repayment Rate
Brazil
$4,058 6%
20 years
97.6%
Guatemala
$4,686
5%, after 4 year grace period
unknown
< 35%
Honduras
$2,780
Market
6 to 10 years
97.3%
India
$1,194
≤ 15 years
88.27%
Malawi
n/a
Mexico
$9,361
Under FIFONAFE ( ), 5% (a third of market rates)
5 years average (Financiera Rural)
< 50%
Bolivia
Concessional loans (i.e. long grace period) w/ varying terms and fairly long repayment periods
Highest repayment rates in Brazil and Honduras

14. The devil is in the details
What have we learned?
The devil is in the details
Incentives really, really matter
3 dimensions:
Beneficiary self-selection
Access to land
Productive Subproject investments
All three dimensions are individually important to achieve successful outcomes in land redistribution projects. But more important even is their relation to each other.
It is FUNDAMENTALLY different to set the requirements for project entry and have someone select beneficiaries VS. setting the requirements, divulgating them across communities, and letting people who meet those requirements come forward.
The fact that these people “jump the hoops” means that not only are they eligible (they meet the requirements), but more importantly they are willing to participate and take on the challenge of acquiring land and making productive use of it.
This is what is known to work, and it’s what will MAKE or BREAK a project.

15. THANK YOU!