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Module 10 - Investments in Land Administration, Policy, and Markets

Land is the main asset of agricultural households in developing countries and is a key determinant of household welfare. Most land is used for agricultural production, which provides the basis for economic sustenance. Access to land plays an important role in improving agricultural productivity, achieving sustainable poverty reduction, and creating broader economic development. This overview provides a rationale for investments in land administration and reform, reviews past World Bank lending experiences, and provides guidance on new investment directions for land-related projects.

Box 10.1 Impact of secure land tenure on poverty reduction

For smallholders, secure land tenure can play an important role in increasing productivity and reducing poverty. More secure land tenure based on formal land titles and record systems can enhance farm productivity and income by providing incentives for smallholders to make productivity-enhancing investments (a security effect), facilitate access to credit and other service and inputs (a collateral effect), and facilitate land transfers and efficiency of use (a transaction effect). A detailed study before and after land titling in Honduras estimated that the combination of these effects on productivity provided an annual rate of return of 17 percent.

Source: López 1997

Rationale for Investment

The Bank’s 1975 Land Reform Policy Paper highlighted the importance of land access and sound land policy for poverty reduction and economic growth. Prior to the 1990s, however, the Bank’s recognition of this importance was not always matched by a strong portfolio of land-related investments, and land-related operations have often been complex, underfunded, lacking in political commitment, and limited in terms of stakeholder consultation and social assessment. The World Bank’s current rural strategy, Reaching the Rural Poor, reflects a renewed interest in, and recognition of, the broader relevance of land issues for sustainable and equitable development. The Strategy acknowledges that the efficient allocation and optimal use of land are essential precursors to broader economic growth and poverty reduction. Accordingly, the Bank is working to increase land tenure security, to facilitate the development and effective operation of land markets, and to improve access to land by promoting land reform in countries with inequitable land distribution.

For smallholders, more secure land tenure is associated with increased productivity and reduced poverty (box 10.1). Secure property rights encourage landholders to manage resources sustainably, increase the value of household endowments, and allow household members to move off-farm temporarily to improve their earning capacity. Insecure tenure negatively affects governance and economic outcomes by increasing conflicts and reducing investment in agricultural production and agribusiness development. Well-defined property rights reduce the need for landholders to expend scarce resources to maintain or defend their claims. Land reform involving the redistribution of land can be a means to correct historical injustices resulting from control of land, as well as an effective way of reducing poverty (box 10.2).


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