High-level Segment of the Economic and Social Council (ECOSOC) 2004

Report of the Ministerial Roundtable Discussion on
'Turning Assets into Usable Capital in LDCs'

Co-Hosted by Government of Benin, UN-DESA and ILC
30 June 2004, New York

Introduction

The Ministerial Roundtable on 'Turning Assets into Usable Capital in Least Developed Countries (LDCs)' was chaired by the President of Benin, H.E. Mathieu Kerekou, and moderated by the ILC Director, Mr. Bruce Moore. The meeting brought together more than 30 participants from ministerial and ambassadorial delegations, civil society, senior UN officials and the private sector.

As has been widely recognized, secure property rights provide not only access to land and natural resources, but also incentives to invest and restore the productive nature of land. But, while secure access to land and capital resources are necessary for poverty reduction, neither is sufficient on its own and often financial services are not the first requirement. Furthermore, the history of agrarian reform provides examples in which poor households have gained formal or informal credit, only to fall further and further into debt. In such cases, poor men and women are often forced to sell or mortgage their land or other key assets to pay for other basic needs. This illustrates a key challenge facing policy-makers in LDCs: how to increase opportunities for savings, credit and other financial services, without putting poor men and women at risk of losing their land - generally their most important and valuable household asset.

As outlined in President Kerekou's opening remarks, Benin has made a commitment to eradicate poverty and make progress to achieving the Millennium Development Goals (MDGs). While emphatic that LDCs are responsible for their own development, President Kerekou noted the need for support from the international community to reach these development goals. This roundtable was one part of an ongoing effort by the Government of Benin to find new ways of working together with international institutions to increase secure access to land and other assets for small-holders, and assist them in making these assets fungible tools for improving household livelihoods and eradicating poverty.

Key Points of Discussion

The roundtable opened by Mr. Moore highlighting the potential risks and benefits associated with bringing land and property assets into the formal economy in LDCs. It is now commonly understood that secure, legally embedded property rights provide increased tenure security - e.g., by preventing poor households from being removed from their land by fraudulent claims of more powerful interests - and may also provide incentives for investing and restoring the productive qualities of the land.

While secure access to land and capital resources are necessary for poverty reduction, however, neither is sufficient on its own and often financial services are not the first requirement. In cases where progress has been made on access to land, lack of access support services, including credit and other financial services, still leaves households vulnerable. Access to technical training to improve their production levels and market linkages are essential in order for farmers to become sufficiently profitable to service the cost of credit.

Roundtable participants felt strongly that, in approaching this issue, institutions must emphasize the importance of human dignity. The processes through which poor households can gain control and ownership over land and other assets are not merely technical - they are vehicles to empower poor men and women, itself a necessary step for increased economic productivity. Several discussion leaders, including President Kerekou and H.E. Anwarul Karim Chowdhury, the UN's High Representative for LDCs, echoed this point during the meeting. This empowerment process is partic ula rly important for women, noted Ambassador Chowdhury, and can be achieved by ensuring that women's names are included on land titles, as has been done in Bangladesh and other countries.

A number of experiences from different countries were exchanged during the discussion. Mr. John Drysdale, who had worked with UNDP in North West Somalia on land-related projects, provided a technical assessment of how the five-year project generated land titles for 4,200 farms, despite long-term absenteeism of the owners and serious conflicts over land ownership.

From a practical standpoint, in order to have had this wide impact the project needed sufficient financial and technical resources to conduct surveying, data collection and map-making. Significantly, though, this strong technical component was accompanied by a political commitment by the government to identify rightful land claims and resolve land conflicts. The government also demonstrated its commitment by assigning two government staff members to work with the project on a full-time basis. It is this political commitment that has translated the increased tenure security generated by the project into a meaningful peace and development dividend.

Once titles are granted, Mr. Drysdale observed, farmers are in a position to use their land as collateral. However, in many cases there are no credit banks operating in rural areas, so that it is not possible for farmers to access formal financial services - the potential for this is still much greater in urban areas, where physical assets can much more easily be used to attract finance, with the possibility that farmers could benefit indirectly if marketing links can be made to urban areas.

In the Philippines , agrarian reform has been the product of a national peace process, in which access to land has been closely connected to resolution of ongoing rural conflicts.

As described by Mr. Tony Quizon, Board Member of the Asian NGO Coalition for Agrarian Reform and Rural Development (ANGOC), a key challenge now facing the country is the lack of support services to land reform beneficiaries. This has led to the proposal of new legislation that would allow farmers to use the land gained through agrarian reform as collateral - existing law prohibits farmers from borrowing against their land for the first ten years after they receive their land certificates.

Borrowing against land by small-scale farmers in The Philippines does occur informally, and may used for household investments, including sending a family member to work abroad. Much of it, however, also occurs to cover emergency expenses such as family illness, or to repay other accum ula ted debt. Without support to make their land productive, farmers who pawn land on the informal market often risk indebtedness, putting in risk the principal - and often only - asset upon which they make their livelihood. Furthermore, there is little evidence that the formal sector would provide loans to small farmers - even for the state-managed Land Bank, the agricultural sector comprises only a small percentage of its total lending portfolio.

Experiences in The Philippines suggest that borrowing against future harvests (either individually or on a collective basis) is an alternative approach to utilizing land resources to access capital without risking loss of the land itself. While income levels have improved - sometimes even doubling - this was usually not enough to raise people above the poverty line on a permanent basis, although it has reduced households' vulnerability. This has re-oriented thinking to the need for the poor to diversify their livelihoods so as to earn income from both farm and non-farm activities.

The Permanent Secretary to the Minister of Foreign Affairs of Cambodia spoke about his country's experience in restoring private land ownership. Cambodia faces serious land administration challenges because of the abolition of property rights during the Khmer Rouge period, a process that included the destruction of written land records. Land again became transferable in 1991, but without a legal and administrative framework for land markets, this created increased problems of landlessness, partic ula rly in areas where land had the highest values. The Cambodian government is now restoring the basis for land tenure security, along with modernizing the technology used in agricultural lands. A Land Policy Council was created in 2000 to coordinate the government's engagement with intergovernmental agencies, such as The World Bank and its PRSP process, so that land components are given sufficient attention.

In discussing the current institutional context for rural finance, roundtable participants reiterated the need for lending procedures to be adapted to serve the poor effectively. Formalizing land rights, and linking these to financial services, must also take account of diverse contexts and methods. Mr. Kadiel Wekwete of the UN Capital Development Fund (UNCDF) noted that legislation is often needed to support customary tenure and other traditional forms of land access and ownership. As rural households understand and believe that laws and legal procedures will protect their rights, they will be increasingly motivated to seek returns on investments in their land. This, in turn, would improve the tax revenue base needed for the public sector to provide other necessary services. Mr. Wekwete emphasized the importance of working very closely with local authorities on these issues, drawing on the experience of UNCDF and UNDP working in Benin 's urban and rural areas.

Another key element, raised by Mr. Joseph Baah-Dwomoh of The World Bank, is for the judiciary system to ensure the rule of law to property rights. The World Bank has had experiences with this issue in Mali and Niger , and welcomed involvement in a pilot programme in Benin . Mr. Baah-Dwomoh agreed that urban and rural issues are not necessarily the same but are inter-connected. The Bank would be interested, among other aspects, in a community-driven programme that would support decentralization and community investments. Linking land access to the NEPAD agenda could be a strategic opportunity toward improving agricultural productivity.

Conclusions and Outcomes

Through the exchange of lessons and experiences from different countries, the Ministerial Roundtable highlighted several key challenges and opportunities facing LDCs, with respect to with linking land and property assets to credit and other financial services. These included:

•  Improving access to land and financial services is an important step to empower poor men and women, and should not be seen merely as a technical undertaking.

•  Secure access to land is necessary but not sufficient. Support services - including not only credit and financial services, but also links to markets, technical training and access to productive inputs - remains crucial for poor households to earn a living from their land.

•  Particular attention should be given to ensuring women's access to land, such as through including women's names on household land certificates.

•  Formal credit sources and financial institutions are still largely absent in the poorest rural areas, although informal institutions do exist.

•  Institutional processes should be adapted so that they meet the needs of poor men and women. This can be encouraged through their direct participation in developing and implementing projects that link land access to rural financial services.

•  Alternatives to using land as collateral, such as borrowing against future harvests, do exist and may offer ways to increase access to credit without risking loss of land. This may be partic ula rly important in contexts where land is the only household asset of value.

In addition to exchanging these experiences, the Roundtable addressed the need for improved interagency collaboration, given the complementary knowledge, skills, roles and responsibilities of local, national and international bodies. Participants acknowledged that their agencies were not fully aware of the activities that other institutions were conducting to address land issues in Benin and that, as a starting point, there should be opportunities to develop a common understanding of unmet needs and priorities that could form the basis of future partnership activities. This could have value beyond Benin , if it demonstrated new partnership approaches that could be considered by other LDCs.

In summarizing the meeting, Mr. Moore noted the support expressed by intergovernmental agencies, including IFAD, The World Bank, UNCDF, UNDP and others unable to attend the meeting, to developing a pilot programme with the Government of Benin to address these issues. President Kerekou extended an invitation to participating international agencies to take part in an interagency partnership with his government and other local partners, reiterating the commitment by the Government of Benin to this effort. Benin 's leadership in addressing this issue is expected to be a catalyst for other LDCs, partners in NEPAD and other countries in the region.

President Kerekou's invitation for such a multi-stakeholder effort was warmly received by roundtable participants, with strong support voiced by Ambassador Chowdhury.

Subsequent planning discussions have since taken place since the 30 June roundtable, to develop a practical plan of action based on the discussion at the Ministerial Roundtable. In addition, participants recommended that the important points raised should be emphasized during the coordination segment of ECOSOC, was beginning the following day, and reflected in the final outcome from ECOSOC 2004, making reference to the partnership framework that has been proposed.