KAMPALA – While over 75 percent of Uganda’s population is engaged in agriculture as their main form of livelihood, they have limited access to credit due to lack of authentic land documents to be used as collateral. And yet access to credit is fundamental to start and boost any agricultural activity (cover cost of planting, weeding and harvesting; invest in improved planting materials).
Collateral requirements by formal financial institutions present a major obstacle to affordable credit by the farming population. Well-documented land is the preferred form of collateral for many formal banking institutions in Uganda, yet, only 23 percent of the land is formally titled. Moreover, most titles authenticate urban land or commercial farms, not customary land mostly held by the rural population. This makes securing loans problematic as banking institutions require titles for land to be eligible as collateral.
Lack of adequate documents to validate ownership has been one of major outcries for farmers’ access to credit. This is especially the case for customary land tenure (which comprises over 80% of Uganda’s land), and yet the land rights here are vested in individuals, families or clans which makes it hard for such land to be used as collateral to access credit from formal financial institutions. Without well-documented land to use as collateral, over 80% of population on customary land will be denied the chance of using Customary Certificates of Occupancy(CCOs) as collateral and hence are less likely to borrow money from formal financial institutions.
The acquisition of land titles will contribute to economic empowerment of beneficiaries who use the land title as collateral to obtain a loan from the bank to invest in farming activities. A land title also reassures owners that they will not lose ownership of their land and this encourages farmers to make long-term investment on the land, which can yield more profits.
Through the Ministry of Lands, Housing and Urban Development, there have been some efforts to have land registered. According to the Ministry of Land, Housing and Urban Development (MLHUD) 2016 annual report, over 23 percent of Uganda’s land is registered. However, this registration is mostly common with freehold, mailo and lease land tenure systems. Land held under the customary system which constitutes over 70-80 percent of Uganda’s total land size generally lacks formal documentation, which makes securing loans problematic, as formal banking institutions require formal (authentic) titles for land to be eligible as collateral.
Government efforts through MLHUD to issue Customary certificates of occupancy (CCOs) offer to farmers an alternative to have formal documents for their land and therefore will increase the chances that farmers will use CCOs to acquire loans from formal financial institutions.
Land registration through the ministry of lands can be seen as one of the long-awaited efforts to deliberate farmers from possessing unregistered land. Land registration provides farmers with titles (formal documents) that can be offered as collateral to financial institutions, improve farmers’ access to credit, and expedite the process of farmers’ investment in agriculture.
Land titling in Uganda takes different forms for the different form of tenure systems in Uganda. Customary certificates of ownership for customary land, certificate of occupancy for Kibanja holder on mailo land, leases for lease land, land titles for private mailo.
In a bid to facilitate customary land registration, MLHUD has implemented a number of interventions. These among others include: Creation of a Customary land registry and establishment of ministerial zonal offices in districts of Jinja, Mukono, Masaka, Mbarara, Wakiso, Kampala, lira, Kibaale and Kabarole.
Although registration of customary land has been enabled in Uganda for many years, very few customary certificates of occupancy have been issued. As of 2017/18, only 50,000 CCOs were issued in Kabale, Kasese, Adjumani, Nwoya, Soroti, Katakwi and Pader 300) ; in 2018/19, over 8000 CCOs were issued in Nwoya and Pader districts. It is estimated that over 150,000 CCOs will be issued in 2019/20. This situation suggests that there are impediments preventing progress in Uganda’s attempt to issue CCOs to landowners and users. Such impediments could be attributed to the populace not being aware of the procedures for acquiring CCOs. There is need to invest in massive sensitization of the procedures to close the gap.
The process of customary land titling has ten steps which include: filling out land registry forms; lodging the application; issuing acknowledgement notes; entering certificate numbers; drafting certificates; typing and checking land registers; preparing files for signing by the appropriate Land Administration Director; plotting parcels and binding certificates.
In addition, registration of customary land tenure is not captured in the National land information system (LIS) which may raise concerns about the inferiority when compared to other land tenure systems. There is need to keep tract of customary land registration in Lis to ease tracking by any prospective financial institution. .
Despite the aforementioned achievements in registration of customary land, the proportion of customary land that is titled is still limited given the fact that over 80% of Uganda’s land is under customary land tenure. This implies more initiatives are still needed to ensure that customary land that forms a major resource for agricultural production is titled to ease farmers’ access to credit. The formalization of land title and access to credit are now intricately connected in development policy prescriptions
By the fact that customary land tenure remains the most predominant (over 80% of land) form of land tenure, government efforts through CCOs offer better solutions to land registration in Uganda.
Land registration through its security-enhancing ability is said to improve on collateral properties making it better and more acceptable form of collateral. Registration, therefore, implies a reduction in the problem of lack of collateral, which is perceived to be a primary factor for limited access to credit.
In addition, land registration makes farmers more creditworthy to attract funding from private institutions for investment
land titling can facilitate economic empowerment of women as it can be used as collateral to obtain credits to invest in their activity. “The acquisition of land titles will contribute to economic empowerment of beneficiaries who use the land title as collateral to obtain a loan from the bank to invest on their activity. A land title also reassures women that they will not lose ownership of their land and this encourages women to make a long-term investment on the land that can yield more profits
Conclusion: By the fact that the Land Act section 8 (7) emphasizes that CCOs shall be recognized by financial institutions as a valid certificate for purposes of evidence of title, it means that CCOs are authentic documents that can be used to acquire loans from financial institutions. Measures through government and NGOs (World Bank) to improve documentation of customary land should be scaled up to increase the chances that customary land can qualify as collateral for loans.
Florence Nakazi is a Research Analyst, Economic Policy Research Centre