The World Bank’s Experience with

Redistributive Land Reform Projects:

The Nuts & Bolts

Jorge A. Muñoz, Sophie Theis & Paul Gardner de Beville

(The World Bank)

March 24th, 2015

The World Bank’s Support to “Land Reform”

1) Land Administration projects Objective: To reform legal, institutional, technical

framework of land rights, tenure and their administration How: Through legal recognition, surveying, cadastre,

conflict resolution, titling, registration, technical assistance

2) Land Redistribution projects Objective: To transfer land from large to small farmers How: By putting beneficiaries in the driver’s seat and

decentralizing the decision-making processes (land acquisition, investments and technical assistance)

The Case for Redistributive Land Reform

Efficiency: Inverse farm size-productivity relationship

Equity: More equitable land distribution associated

with higher economic growth and reduced poverty

Social stability: Land property relations are inherently

political

Traditional or Classical Land Reform

Farm size limits by law, inefficiency penalized

Centralized government agency: Designates and expropriates large farms Selects beneficiaries Plans settlements and farm activities Finances infrastructure, services, assistance Usually only user rights issued

Landlords contest process, price leading to a lengthy and costly process

Beneficiary-Driven Land Reform

Beneficiaries self-select themselves Beneficiaries select farm, negotiate acquisition Local council verifies eligibility of beneficiaries, of

farm (including its price), and investments Government provides subsidized loan for land Government provides matching grant to

beneficiaries for investments and tech. assistance Beneficiaries manage fundsLand is titled in name of beneficiary association

Intentions of the selection process

What mix of beneficiary group, land, and investments will have the best chance of enabling successful farmers and productive farms? Beneficiaries should be:

Eligible (income and land caps) Amongst the eligible landless population, the most

committed and capable Part of a group with strong social capital

Land should be: High quality, fairly priced land with clear and legal

tenure status, meeting beneficiaries’ preferences

Investments should be: Feasible and viable, given land, skills, and market

considerations

Community Associations

Identify, Prepare, Contract, Manage,

Maintain, Co-finance investment subproject

Present project

proposal

Municipal Councils

State Technical Units

Project Account

Supervises MC Evaluates Project

Monitoring & Evaluation

Authorizes release of $

AnalyzeVerify

eligibilityApprove

Supervise

Manages $

Project Implementati

on Agreement

Operating Agreeme

nt

Selection and verification process in Brazil

Variations in the selection process

Projects used different institutions to review beneficiary eligibility, choice of land, and productive investment proposals.

Some important variations: Local-level councils (Brazil) vs. centralized institutions

(Guatemala, Mexico) to verify beneficiaries’ eligibility and land price

Mobilization of applicants (Honduras), sometimes at the expense of self-selection (Guatemala)

Flexible/stringent beneficiary group requirements Guidance/influence on investment proposals (India vs.

Mexico) Review of investment proposals by private financial

institutions (Honduras) vs. public institutions with budget incentives

The package of benefits shapes beneficiaries’ behavior

Challenge: How to give beneficiaries autonomy to choose land,

but make sure they negotiate a fair price and do not get excessively into debt?

Two part solution: Give beneficiaries the means to become sufficiently

profitable to repay the loan Provide incentives for beneficiaries to only take out the

amount of credit that they can repay, and repay it!

Key variation across projects: Financial package, specifically: how the loan and grant

components were linked

Financial Package in Brazil: Loan-Grant Link

Total Financial Package

Grant

Loan Loan is only used for land purchase

Grant is used for investments and technical assistance

Any part of the financial package not used for the land purchase loan can be used, instead, as a grant.

Project Outcomes  

ProjectsNumber of

families settledTotal number of farms

Total area

distributed (ha)

Average land size per family

(ha)

Family Income Increase

Brazil 55,369 2,723 1,230,334

20.7 From RS$ 1,656 to RS$ 4,064

Guatemala

15,487 186 71,361 4.6 No data

Honduras 991 181 2,400 2.4 From $630/yr to $1,430/yr

India 5,303   1,840 0.3 From $488/yr to $1,132/yr

Malawi 15,142 666 33,400 2.2 From MKw 4,530/mth to MKw

30,500/mthMexico 10,740 trained     No data

4,526 acquired land

 

Projects Costs and Debt to Asset Ratios Projects Averag

e Cost of Land

per Hectare

Average Cost of

Land per Beneficia

ry

Financial Package

per Beneficia

ry

Cost of Land (%

of the Financial Package)

Debt to

Asset ratio

Brazil $195 $4,058 $8,047 50.4% 1:2.0Guatemala $1,017 $4,686 $7,522 62.3% 1:1.6Honduras $1,150 $2,780 $7,480  37.1% 1:2.7

India $3,479 $1,194 $7,457 16.0% 1:6.2

Malawi $143 $315 $1,050 (grant) 

30.0% n/a

Mexico $1,272 $9,361 $18,000 to

$33,000

52.0% -28.4%

1:1.9 1:3.5

Credit Conditions & Repayment ratesProjects Loan

Amount

Interest Rate

Maturity Period

Repayment Rate

Brazil $4,058 6% 20 years 97.6%

Guatemala

$4,686 5%, after 4 year grace

period

unknown < 35%

Honduras

$2,780 Market 6 to 10 years

97.3%

India $1,194 Market ≤ 15 years 88.27%

Malawi n/a n/a n/a n/a

Mexico $9,361 Under FIFONAFE

(2004-2006), 5% (a

third of market rates)

5 years average

(Financiera Rural)

< 50%

Bolivia n/a n/a n/a n/a

What have we learned?

Incentives really, really matter

3 dimensions:• Beneficiary self-selection

• Access to land

• Productive Subproject investments

The devil is in the details

THANK YOU!