Microfinance + Property Rights

This story originally appeared in our October 8, 2010 e-magazine. Click here to subscribe.

Microfinance institutions have been hailed for the trusting relationships they have forged with the poor across the world. How can these networks be utilized?  Some believe they could serve as an important tool in helping the poor understand their property rights, and access secure land title. Abby Callard reports.

“Microfinance plus” is an evolved state of microcredit that utilizes the far-reaching branch networks of microfinance institutions (MFIs) to distribute impactful products like sanitary napkins and LED lights. Quite a few MFIs are already working with private sector and NGO partners in order to enable customers to have access to new products and services. But, what other services can be provided through MFIs? Is there a meaningful way in which MFIs can leverage their relationships and networks to educate the poor about their legal rights?

Sanjoy Patnaik, state director of the Rural Development Institute in Orissa,  says “It’s time that MFIs get beyond finance.”

MFIs are well positioned to become key partners in the effort to educate people about land rights; loan officers usually have a trusted relationship with microfinance clients and understand their most critical needs. MFIs can also allocate loans specifically for the purchase of land.

Many microfinance loans go toward the purchase of land, but MFIs are likely to be unwilling to make this a formal agreement due to the risks involved. The land rights situation can be difficult to navigate—unclear trusts, illegal squatters, and customary laws—making it a hard market for an MFI to enter. In addition, MFIs are reluctant to add the responsibilities of land rights education to their already overstretched loan officers.

However, there are several institutions that are adding value to clients through innovative means. BRAC, an MFI operating in several South Asian and African countries, educates its clients about their land rights informally through their legal aid program. The MFI identifies women in the Joint Liability Group and provides them loans that cover the cost of legal education, titling to the land and financing for the title.

Sinapi Aba Trust, an MFI in Ghana, is leveraging its loan officers to collect information that is being used to build a database about access to property for the poor.  Peter Rabley, President of International Land Systems, the technology partner involved in the project, said, “It’s a paradigm shift to get the loan officers and the MFI to function as the delivery mechanism for generating this information. Traditionally, that has only been done by the government.”

MFIs can serve as a remarkable asset in the work to collect information about borrowers and their access to property because they are trusted and well-known by the communities.  Sinapi Aba has 50 branches in Ghana, whereas there are only three land registration offices in the country. Because of this, the organization has a greater presence in the community.

There are other one-off projects happening in regions all over the world. SEWA Bank, an MFI based in Ahmedabad, Gujarat, has helped secure 400 plots of land in women’s names under the Land Act. The MFI gives loans to use for purchasing land as well as recovers mortgaged agricultural land in women’s names. This breaks the traditional male-to-male inheritance path. Among other things, this prevents widows from being kicked off their land by their late husband’s families.

Although MFIs have only begun to enter into the land rights struggle due to the risk involved, pioneering MFIs have shown that their networks and the relationships they’ve developed with their clients can be used to further the land rights movement.  When government policy is slow to materialize or implemented ineffectively, MFIs may serve as a great resource to reach the rural poor to educate them about their rights and help them access land.

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