Formalising Land Rental Transactions in Ethiopia – is Land certification enough? 20 March 2018 Annual World Bank Conference on Land and Poverty Authors: Ignacio Fiestas, John Leckie and Christina Mayr Title slide – Option 2

Outline Overview of LIFT RLAS and market systems in land programmes The example of LIFT The importance of incentives Conclusion

The LIFT programme UKAid and GoE Duration: 2015/2020 Size: £63 million Rural land in four regional states (140 woredas) Increase tenure security of 6.1m hh Target cost: £3.26pc

LIFT outputs and outcomes Deliver 14m second level land certificates (SLLC) Improve rural land administration system (RLAS) in 140 woreda offices Enhance productivity and investment on rural land (using a market systems approach) Improve policies/regulations of rural land administration OUTPUTS OUTCOMES Increased investment and incomes of SLLC holders Improved gender equality and social capital Semi-autonomous land institutions for delivery of land administration services

Progress to date - highlights Received an A+ in 2017 Annual Review Over 7m parcels demarcated Over 5.5m certificates approved 32 land administration offices operational Introduced a standardised land rental contract accepted by all regions Increased formalisation of land rental transactions Developed individual loan product based on the SLLC as guarantee Developed distribution channels for improved agricultural inputs HERE IS A PHOTO OF THE FIRST TRANSACTION IN A LIFT WOREDA (MESKAN IN SNNP REGION)

Why is land certification not enough? Land certification per se has limited impact on long-term investment (but necessary condition) A functioning land administration system is key to ensure sustainability of investment in land certification Literature supports the need for complementary interventions to ensure that landholders can benefit from the certificates, especially in developing countries Mention some literature: Whitehead and Marbell , 2012 Mention existence of several market failures in developing countries Any investment in land certification must be supported by a functioning land administration system. Without systems for maintaining the land register, land records can quickly become out of date. This was a challenge faced after the recent land certification programme in Rwanda, and Ethiopia encountered similar issues following an earlier attempt at ‘First-Level Land Certification’. Not all land registers were maintained. The register guarantees land rights, and must accurately reflect the real right-holding over property. Without maintenance, it quickly becomes redundant. The Land Administration component of LIFT is critical to the sustainability of the programme, and has been designed not to repeat these missteps. A functioning RLAS is not just key to maintaining the land register, but also to the success and sustainability of LIFT’s market systems interventions. Interventions in areas such as the rural rental market may only work if the land register is consistently maintained, recording all land transactions through the land administration system, ensuring public trust in the system, and guaranteeing the security of the rental agreements. One reason that land holders do not formally register transactions is that they lack awareness of the advantages of registering transactions, as well as lacking incentives to pay the costs (both financial and opportunity costs) that are usually associated with recording transactions.

Why market systems for land? Land title holders operate in complex realities where existing market failures limit benefits Figure 1 is a pictorial representation of a land market system. It gives a holistic view of the rural land market and how smallholder farmers operate within it; it shows links between the rural land market and other related markets (agricultural inputs, finance, information); and that policies and regulations shape incentives in the market and affect land title holders Features of market systems: Seeking to ensure that the transformation of market systems means that they function more effectively for the poor. Ensuring that interventions focus on behavioural change, affecting the incentives and capabilities of key market actors. Focusing on addressing the underlying constraints rather than the symptoms. Emphasising the importance of achieving sustainable and systemic change, thus ensuring that the impact of interventions extends beyond the life of the programmes.

How do we apply market systems to LIFT?

Intervening in Ethiopia’s rural land rental sector Existing constraints limit the ability of SLLC holders to formalise transactions / rent out land and maximise investment Regulatory environment Informality Access to information Institutional capacity Social norms By identifying constraints you also identify the opportunities for interventions!

Interventions to address constraints Providing access to information on land availability and price Providing access to information on rights and obligations Land rental service providers Communications campaign Improving the legal and regulatory framework Standard land rental contract Research on policy gaps to influence policy making

Results to date Standard land rental contract introduced in regions Uptake of contracts and increase in formalisation 75% increase in contracts registered at kebele level 7,185 contracts registered, benefitting approx. 14,370 households Increase in rental transactions 40% of contracts from first-time renters Shift from crop-sharing to cash rental 50% of parcels that have previously been crop-shared are now rented for cash 287 land rental services providers operational Revised Regional Land Administration and Use Proclamation in Amhara EIS survey – more than 50% of parcels that have been rented in the past are now being rented for cash rather than sharecropping uptake of contracts increase in formalisation (a big deal in land) and shift to cash rental

Conclusion Land certification alone is not enough – need for RLAS and interventions in related markets to ensure sustainability and impact Market systems thinking is needed to: understand what are the constraints that limit the ability of landholders to benefit from SLLC widen the scope of land tenure programme create incentives for uptake and sustainability of land tenure programmes identify other market actors that could potentially be a source of revenue for RLAS Land certification alone is not enough – need for LAS and interventions in related markets Applying a market systems approach can help to explore how different market actors can potentially be a source of revenue for LAS Explore other applications of data/information from land programmes in related markets Incentives for farmers New products developed increase demand for SLLC and registration in RLAS Incentives for commercial entities Accurate and updated information in RLAS as cornerstone for up-scaling interventions Access to reliable data opens door to new opportunities (e.g. insurance) Incentives for GoE Sustainable source of financing for RLAS if information can be sold to commercial entities A functioning RLAS is not just key to maintaining the land register, but also to the success and sustainability of LIFT’s market systems interventions. Interventions in areas such as the rural rental market may only work if the land register is consistently maintained, recording all land transactions through the land administration system, ensuring public trust in the system, and guaranteeing the security of the rental agreements. In the case of LIFT, however, we have created market interventions (around land rental and credit) with clear incentives for farmers to register their transactions. By requiring a functioning RLAS as a pre-requisite for these transactions to take place and for farmers to receive the associated benefit, it is hoped that the interventions will stimulate demand for land administration services, as well as increasing growth and productivity.

Thank you Ignacio Fiestas – ifiestas@nathaninc.com John Leckie – john_leckie@dai.com Christina Mayr – cmayr@nathaninc.com