Ethiopia is currently in the process of economic transformation with the goal of becoming a lower-middle income economy by 2025. Agriculture is arguably the most important focus of this process, as developing the agricultural sector is one of the best ways to stimulate rapid, inclusive economic growth. However, this development would have proven impossible if not for second-level land certification.
Land is owned and administered by the State of Ethiopia, which means that the landholders receive usage rights that they can rent out and their children can inherit. However, inefficiencies and inaccuracies in the old system of land registration resulted in wide-spread land tenure insecurity, and as a result, people often didn’t want to invest in their land. They often couldn’t invest even if they did want to, as the lack of security meant it was almost impossible to access finance at reasonable interest rates.
One example of this catch-22 situation is 49-year-old Adamu Tilaneh from the Amhara regional state. After he and his wife, Haimanot, received their 0.5-hectare plot of land, they had planted it with eucalyptus trees.
They didn’t do too bad, but they knew they could make more money by engaging in a more lucrative business. They wanted to start fattening oxen for slaughter, but couldn’t access enough finance. This changed once they decided to get second-level land certification for their plot.
Second-level land certification is a system developed by the Responsible and Innovative Land Administration of Ethiopia Programme (REILA). The certification process involves registering the precise geographical locations and sizes of individual farm plots, using technologies such as GPS, satellite imagery, or orthography.
The REILA programme aims to improve Ethiopia’s land administration system and strengthen land tenure security. To make this possible, REILA worked to enhance the process of registering land parcels in the country, focusing particularly in Amhara and Benishangul-Gumuz regional states. The programme also developed and launched the National Land Administration Information System (NRLAIS). This IT system, as well as registration process upgrades and the training of people active in the land administration sector, enables the reliable and accurate second-level land certification and updating of the records.
Once Adamu and Haimanot received their second-level land certificate, new opportunities opened up for them. This certificate provided precise information on everything from the land’s size to its location (even including a map of their land), and enabled financial institutions to run a check on whether there were any other loans or agreements attached to the land that would prevent a loan from being issued. In short, the certificate allowed Adamu and his wife to put their land up as a guarantee for a bigger loan at lower interest rates.
They approached the Amhara Credit and Saving Institution (ACSI) and created a business plan for their oxen fattening enterprise. ACSI extended a loan for 50,000 Ethiopian birr (about EUR 1,500). The loan agreement requires the couple to repay 15,000 Ethiopian birr (EUR 470) every six months, with an annual interest rate of around 15%. During this time, they can’t do other transactions on the land such as renting it out or taking another loan. If they default, ACSI controls usage rights of the land for two years, during which the institution can rent it out, sharecrop, or transfer the land in any other legal form in order to recoup the money loan. After that period, the rights revert to Adamu and Haimanot.
The scheme of using second-level land certificates as a guarantee for access to credit has been developed by the DFID-funded and DAI-led LIFT project (Land Investment for Transformation), in which NIRAS is a partner. The scheme has spread to REILA districts, and REILA has included it in public awareness campaigns and monitoring.
Thanks to this loan, the couple have been able to buy five oxen, which they are fattening with the aim of selling them during religious celebrations later in the year. Adamu is optimistic about the business. The oxen are healthy, and he expects to make a profit off them, which he’ll use to further expand his business and eventually start repaying the loan. He has one message for other farmers:
Register your land and have the certificate in your hand. But do not simply put the certificate in your pocket or under the bed. Use it to borrow money. Invest the money in appropriate businesses to change your families’ lives.