Converting Dirt to Gold: How to Create Capital for Millions of People in Developing Countries

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Editor's Note : The writer, Jack McKenna, is a renowned International Land Administration & Geospatial consultant having 40 years of experience in 53 countries of Europe, Asia, Africa, Latin America and Caribbean. He has authored a book: “The Land Administration Toolkit” which is a practical guide for establishing a modern Land Administration System in developing countries. In this article he has emphasised that for creating capital in developing countries, immediate action is required for the establishment of an inclusive, technology-driven, poor-friendly and corruption-free land administration system.

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An important factor that prevents the formation of capital in developing countries is the fact that too much land is in the hands of too few people.  By some estimates, putting land measuring as little as one-tenth of an urban acre, or one or two rural acres, in the hands of the poor in developing countries is sufficient to break the cycle of poverty. Furthermore, the poor people in developing countries having assets in the form of houses, crops and businesses, cannot create capital from them. One reason they cannot do this is the lack of a formal property system, or there is a formal property system that operates under corruption-ridden, complex, expensive and pro-wealthy rules.

This article discusses how capital can be generated from the valuable assets possessed by the poor of developing countries in the form of land that they own or occupy.  The first step in converting their land from an asset to capital is providing a solution to the problem of achieving secure land tenure.  Debates have been taking place regarding the lack of secure land tenure globally for many decades.  If nothing is done to implement a workable program for establishing secure, pro-poor and pro-women land tenure very soon it is safe to assume that the same debates will continue for many more decades.  Citizens should not be made to suffer the full brunt of poverty, exacerbated as it is by disease and civil strife, for any longer than is necessary. A worldwide approach to securing land tenure must be implemented as soon as possible.

Importance of Land Records System

The real estate market is the proven catalyst for generating capital movement in markets worldwide.  The power of the real estate market is the assets in the form of land and structures.  Knowing “where” this property is located, and “who” owns it is the basic foundation for real estate transactions.  The ability to access this “where” and “who” information is critical for the rapid exchange of properties in the marketplace. 

If a comprehensive, accurate and transparent land records system is in place, the speed with which such property transactions can transpire is significantly increased.  The faster these property contracts move, the more capital there is in motion in the marketplace.  The more capital that is available in the marketplace, the greater is the investment and growth that results.

Women’s Right to Land

Capitalist countries take for granted the right of women to own property.  Many developing countries deny women the right to own property.  A report by ActionAid International, “Cultivating Women’s Rights for Access to Land” 2005, states that, although it has been proven that empowering women socially and economically leads to positive effects on household food security levels, women experience unacceptable statutory and customary discrimination. 

Women’s rights to land are often secondary and derived from the rights of others.  They have limited knowledge of their citizenship rights and they are susceptible to instrumentalization by men. However, it is one thing to acquire the right to own property.  It is quite another to secure tenure to that property and create capital from it, in a corruption-free, affordable and timely manner.      

Importance of Secure Land Tenure

Between half and three-quarters of a country’s wealth can be comprised of land and buildings and securing land tenure through the creation of a property title can significantly increase property values and subsequent investments.

Secure tenure, even for slum dwellers, transforms homes into a tangible asset. A title transforms that asset into capital. Property owners can leverage their homes to finance their work, or they can rent out rooms for income support. Investment in community improvements and urban infrastructure builds value into these tangible assets while improving the productivity of home-based enterprises.

Hernando de Soto’s book “The Mystery of Capital” attempts to explain why capitalism has triumphed in the West and failed everywhere else.  The following extracts from that book offer powerful arguments to support his theories.

"The major stumbling block that keeps the rest of the world from benefiting from capitalism is its inability to produce capital.  Capital is the force that raises the productivity of labor and creates the wealth of nations, and it is the one thing that the poor countries of the world cannot produce for themselves."

"Even in the poorest countries, people save and accumulate wealth. But the poor hold their resources in defective forms: houses built on land whose ownership rights are not adequately recorded, unincorporated businesses with undefined liability and industries located where financiers and investors cannot see them.  Because the rights of these possessions are not adequately documented, these assets cannot readily be turned into capital, traded or used as collateral for a loan."

"In the West, by contrast, every parcel of land, every building, every piece of equipment or store of inventories is represented in a property document that is the visible sign of a vast hidden process that connects all these assets to the rest of the economy.  These assets can be used as collateral for credit. "

"Without formal property representation or law, the assets to be found in Third World and former communist nations are dead capital.  The inhabitants of these nations have houses, but not titles; crops but not deeds; businesses but not statutes of incorporation and they have not been able to produce sufficient capital to make their domestic capitalism work."

"The formal property system is where capital is born.  Once the focus is on the title to a house and not on the house itself, it is possible to go beyond viewing the house as mere shelter (a dead asset) and to see it as live capital."

A very informative book, “Who Owns the World”, by author Kevin Cahill is a compilation of landowners and landownership structures in every single one of the world’s countries and territories. This book asserts that the main cause of most remaining poverty in the world is an excess of land ownership in too few hands. The book also asserts that private ownership of a very small amount of land – one-tenth of an urban acre or an acre or two of rural land – granted to every person on the planet has the potential to, and, Cahill believes, will, begin the ending of poverty on a global basis.

In some countries people have obtained the land they need, the acreage for a private dwelling, and obtained a form of ownership for that acreage.  In many cases, what they have is not ownership but feudal tenure, sometimes called ‘freehold’. The distinguishing feature of universal poverty is landlessness.  Yet, there is no great movement to get land to the impoverished masses.  Aid, yes.  Land, no.

Achieving secure land tenure requires the implementation of the following steps:

• Establishment of equitable and transparent property registrations that will ultimately lead to an internally generated revenue system that will support infrastructure creation, including health clinics, roads and schools.

• Reduction of the property registration time from several months to a few weeks or a few days to accelerate the revenue generation process.

• Reduction of the property registration cost from the current cost, (which can be several times to a small fraction of each country’s Gross National Income) to bring about greatly increased levels of property registration and accelerate the revenue generation process.

• Creation of an integrated modern registry and cadastre system. This will provide a valuable adjunct to the registration process while providing the necessary tool to implement efficient land records management technology that will greatly facilitate economic development and management of agricultural, environmental and natural resources.

Establishment of a Formal Property System

Establishing formal property rights must, of necessity, be the foundation of a formal property system, and yet more than half of the world’s countries have either no land registry at all or one that covers less than 10% of the land in the country.

A formal property system contains the following components:

• The Property Registry which records legal ownership.

• The Cadastre which records physical characteristics and identifies property boundaries.

• A Title Registry which registers titles together with the indications about the rightful claimant in relation to a parcel of land. For the process of securing land tenure, title registration is preferable to deed registration.

There is an urgent need to establish formalized registry and cadastre databases in developing countries and to use the latest available technology to create a property title to internationally recognized standards.  Such a title can be taken to the bank to secure primary and secondary mortgages.

Integration of the registry and cadastre databases is required to ensure that simplified, transparent and equitable land records management systems are created to reduce the amount of time it takes to register a property and, just as importantly, to reduce the very high levels of corruption that exist within many national property registries. 

The situation in many developing countries is further exacerbated by a requirement for government consent before property can be transferred from one owner to another.  There is a direct correlation between the very complex rules that exist in most developing countries for securing land tenure, the level of corruption (in the form of bribes) and the excessive time and cost involved with completing the property registration process.

Note: Almost no country is free from corruption (UNDP, 1998). A total of 124 of the 180 nations surveyed in Transparency International’s 2022 Corruption Perceptions Index (CPI) scored less than 50 out of a clean score of 100, indicating serious levels of corruption in a large majority of the countries surveyed.

Transparency International Corruption Perceptions Index 2022

Total of 180 Countries Scored from 0 to 100

Rank	Sample Country	Score out of 100
1	Denmark	90
10	Ireland	77
18	United Kingdom	73
51	Rwanda	54
72	Benin	43
85	India	40
123	Kenya	32
130	Egypt	30
150	Nigeria	24
171	Burundi	17

Deployment of Fully Functional Land Administration System (LAS)

A successfully implemented Land Administration System (LAS) will:

• Provide comprehensive system testing, acceptance and deployment of the LAS;

• Prepare comprehensive procedure manuals that document the protocols necessary to ensure system currency and that document the entire project integration process and show how new products and services will be implemented, including staff training;

• Load all scanned and indexed documents, digital orthophotos, cadastral plans and other data and databases into an integrated land administration system; 

• Build and deploy all appropriate intranet interfaces to allow viewing and manipulation of data;

• Utilize the document management archival and retrieval system for all data included within the LAS;

• Demonstrate the full functionality of the Land Administration System, including the integration of all agency workflows;

• Fully deploy the system after acceptance by the government agencies;

• Reduce duplication of effort in and between the various departments and agencies of the government;

• Ensure all products and service are completed in compliance with the long-term needs of a Web Portal within each country;

• Prepare Metadata templates for all proposed geospatial sources that will instill data accountability and limit data liability. Metadata are critical to the search, use, re-use, and quality assessment of data. Incorrect or non-existent metadata constrain the sharing and exploitation of Geospatial Information, resulting in negative impacts to the prospective customer community, and

• Create a National Spatial Data Infrastructure

• The most significant component of a modernized land administration system is the critical need for ongoing daily maintenance of the registry and the cadastre. 

New Information Technology for Registry, Cadastre and Tax Office Automation and Management

Powerful land administration software is offered by Spatial Dimension, a global provider of enterprise land management solutions for the purpose of creating and delivering an electronic government solution to integrate mining, land registry, land cadastre and real property tax databases.  The solution includes utilization of technologies such as satellite positioning, aerial, satellite and UAV mapping, GIS and document imaging while providing the training, technology and knowledge transfer to all developing countries for the long-term sustainability of projects.

Field Data Collection (the Cadastral Sweep)

The field data collection process is a methodology that is sometimes referred to as “The Cadastral Sweep”. It is a means of determining property ownership by teams of interviewers who conduct interviews with the owners/occupiers of properties within jurisdictional boundaries of countries or municipalities. 

This task can be carried out under the direction of a supervisor who is responsible for assembling interview teams recruited from the local population. After training, the teams are equipped with a variety of equipment which can include a GPS receiver, a GPS capable digital camera, a ruggedized hand-held data collector, questionnaire forms (digital and hardcopy) and pamphlets or promotional material describing the property ownership program.

Benefits of an Automated Registry and Cadastre

To accomplish Registry and Cadastre automation goals it is proposed that software products, augmented with customized solutions for each country, are installed as soon as possible.  This “Success Module”, an integrated electronic government solution, will allow the governments of developing countries to:

• decrease the cost to register property;

• decrease (or eliminate) corruption within registry offices;

• increase efficiency at all levels of registry, cadastre and tax administration;

• reduce redundant tasks between agencies (with the added benefit of reducing the demand for payment of bribes);

• allow retrieving and viewing of archived data via electronic means (thereby preserving the content and condition of original documents);

• streamline the workflow at all government agencies and provide maintenance capability of digital parcel data;

• increase tax collection revenues through the use of updated shared data bases;

• provide a foundational Intranet and/or Internet based LAS for use by both private and public entities on a subscription basis;

• create street names and house numbering databases, (for use in mortgage applications, emergency dispatch and disaster planning);

• increase revenue streams through the use of an information portal via the Intranet and/or Internet; and

• provide improved customer service and solutions to the citizens of developing countries globally.

Developing countries require a modernized land administration system that analyses the number and nature of registrations and processing times. The automated registry software comes with a full featured reporting package, with a large number of pre-defined reports. Additional reports can be added simply and without programming changes. Reports can be categorized, and access to reports can be limited by the system administrator. The following are examples of pre-defined reports:

• Proprietor Index by Name

• Proprietor Index by Parcel

• Instrument Presentations/Collections

• Instruments in Process

• Government owned Lands Corporate-Owned Lands/Non-Citizen Owned Lands

• Transactions History

• Revenue Summary

• Worker Productivity

It is essential to track all transactions through the registration process including real time priority of applications via a transaction audit trail. The system should continually monitor itself in the background, looking for suspicious activity or potential problem areas, with all potential anomalies reported to the Registrar, the Chief Surveyor and technical and IT support staff.

Pro-poor tools for land management and administration must also:

- Protect all land rights the poor are entitled to;

- Be affordable for the poor for first registration and transfer of property;

- Protect vulnerable groups such as women.

A Call to Action

There is a direct correlation between the complex rules involved for securing land tenure in developing countries (requiring visits to multiple agencies and exposure to a high level of corruption encountered while visiting those agencies) and the time it takes to complete the process.

Automated and integrated land administration solutions for government run registries, cadastres and tax offices are available immediately for developing countries.  Citizens may as a result, for example, pay stamp duties at any of those offices rather than make multiple visits to banks, municipal offices or government offices.  The most immediate benefit will be a reduction of the opportunities by corrupt officials to extract bribes for the services that are supposed to be offered for reasonable fees for services provided within a reasonable time frame.

The current complexity involved with the issuance of a property title can be greatly simplified through development of an internationally accepted standard for property title creation. It is not realistic to expect that a continent-wide standard for title creation can be implemented due to the very complex differences that are the reality within the diverse ethnic, legal, political and religious regions. However, the basic fundamentals involved with creation of a property title can be incorporated within a customized national standard for title creation that will result in an immediate increase in the efficiency with which a title can be created and issued.

It is essential to listen to women’s voices. There must be increased awareness of women’s inequalities related to land rights and the need to increase female literacy.  It is necessary to develop the means to identify groups of vulnerable women who lack access to land, such as war widows, refugees and those discriminated against because of HIV/AIDS.  The fusion of secure land tenure for such women’s groups with LAS technology will result in a purely positive force that will benefit greatly the developing countries of the world.

Finally, the establishment of rule of law must be encouraged in all developing countries that desire to improve their economic conditions. Breaking the cycle of poverty and providing individual freedom requires the rule of law, not the rule of the AK47, as is the case in too many developing countries.

References

• “A Land Administration Toolkit”, Available at Amazon.com, Jack McKenna, 2021

• “The Workflows of Land Administration and 4IR Technology”, Geospatial World and UNGGIM ZOOM Seminar, Jack McKenna, 2021

• “The Anatomy of Corruption”, GIM International, Issue 3, Volume 34, Jack McKenna, May/June 2020

• “The Parcel Cadastre and Internally Generated Revenue”, The 4th Annual National Surveyors Conference, Ramallah, Palestine, Jack McKenna, September 2017

• “Internally Generated Revenue”, Spatial Dimension – https://spatialdimension.com, Jill Urban-Karr, 2016

• “The Mystery of Capital”, Published by Basic Books, New York, NY, USA, Hernando de Soto, 2000

• “Who Owns the World”, Published by Mainstream Publishing Company, Edinburgh, Scotland, Kevin Cahill, 2006

• “Land Registry Automation in Central America”, The Organization of American States (OAS) and the Central American Cadastre, Registry and Tax Systems Conference, Guatemala City, Guatemala, Jack McKenna, 2004