4.3.1. Establish a System to Record and Protect Property Rights

DESCRIPTION

Confidence in and the ability to enforce property rights and the rule of law are essential building blocks of commerce. Without both the legal property rights protections and the procedural ability to demonstrate and enforce ownership, private commerce and finance are severely constrained because it is impossible to enforce contracts and to protect private capital. How can a prospective borrower pledge property as collateral if they cannot prove ownership? Why would a bank grant a loan if it could not enforce payment or claim collateral in the case of default? USAID has supported countries to make it easier to buy, register, and sell property, lowering the barriers to finance and wealth building for individuals and businesses.

CONSTRAINTS ADDRESSED

1. Ability for private sector businesses to emerge
2. Ability to recover and sell property
3. Ability to resolve bankruptcies in a timely manner

ADVANTAGES

Enforceable property rights and efficient judicial systems serve as the basis for modern financial marketplaces. They can help ensure that contracts are enforceable and can significantly reduce transaction costs. Modern property rights reform can also allow women to own land in countries where they were historically barred.

DISADVANTAGES

Resolving land disputes and enforcing property rights can lead to conflict and insurgency in countries with longstanding disputes or cultural norms opposing enforcement. Highly bureaucratic judicial systems can necessitate establishment of alternate “expedited” enforcement approaches for financial transactions.

MUST HAVE’S, CRITICAL POINTS, OR QUESTIONS TO CONSIDER

Legal reforms to property rights should include mechanisms to register the ownership of property, and ideally to pledge property as collateral for financial contracts.

VIGNETTE: FORMALIZING PROPERTY RIGHTS IN POST-CONFLICT COLOMBIA

SITUATION

Land issues were at the heart of Colombia’s long-running violent conflict, displacing an estimated 6 million people and leaving large portions of the country essentially ungoverned.

STRUCTURE

Now, with a landmark peace agreement in place, USAID is working to help resolve critical land issues by supporting the Government of Colombia to formalize property rights across the country, organize the national land registry and return land to those who lost it in the civil war.

IMPACT

The evidence is clear that strong property rights are an essential foundation for economic growth and responsive democratic governance. And from Colombia to Kosovo, experience has shown that resolving land disputes and clarifying property rights can help reduce tension, create lasting stability and set the stage for productive investments and economic growth.