Property Rights: The missing key to eradicating poverty

By Nerj Deva, MEP

There is a recognition that the development landscape is shifting. Foreign aid, however well intentioned, has proven wanting to the developmental challenges of the 21st century. For me, the realisation that we needed to shift our development perspective arose from an abiding sense of frustration. As our best intentioned efforts hit stumbling blocks, developing countries often seemed dependent on more aid rather than less.

I would like to now take the opportunity to share with you a brief story. Imagine a nation, undeveloped and peopled by largely uneducated refugees. They have no assets to trade, no money to invest. They lack bank accounts, donor funds, law courts or hospitals.

An area near Maai Mahiu, Kenya, where many families live in tattered tents.

Yet, within the short span of some 120 years it is a nation that will transform itself. It will do so largely unaided and emerge as the richest, most technologically advanced nation in the world. It sounds rather fantastical and yet it is a history we are all, at least passingly familiar with. It is the story of America; it is, I believe, the story of development. They implicitly understood the fundamental value of property rights; how they serve as the cornerstone of nation building and underpin wealth creation.

Their legal property system formed the foundation of a country rising up from a universe of assets in their natural state-bare farm land, simple homesteads or small businesses – engineering a conceptual universe of capital in which the full productive potential of assets could be unlocked – investments, shareholdings, equity, debentures, mortgages and insurance - the basic building blocks of wealth creation.

Today, 1.2 billion people still live either without permanent access to land, or occupying property for which they have no formal claim. They have no legal titles, no surveys delineating their lands and no legal or financial means of turning property into capital. Such homes are mere brick and mortar, failing to serve as a security that can be borrowed against. Yet, the total value of this unregistered wealth is thought to be $9.3 trillion; a figure 93 times larger than the combined foreign aid given to developing countries across the past 30 years.

These are assets that, in their current state, cannot be protected or mobilised but might hold the key to an evolving development agenda. In Africa alone, 90% of the land is thought to remain unregistered. With a piece of paper and the right legal framework, that property can become a significant security that banks can lend against. This in turn can provide the capital needed to invest in small businesses and offers people a stake in their own economy.

In any period so defined by austerity, it is understandable for people to question the validity of aid. But for every story of waste and corruption splashed across our newspapers, there are a thousand untold where people have been fed, life threatening illnesses treated and anything from clean water to education provided.
Simply put, we need to restore confidence to the manner in which help is given and reappraise our approach to a broader development policy that empowers developing countries to sustainably help themselves.

Mr. Deva, Member of European Parliament and Vice Chairman of International Development Committee, wrote this column for Habitat for Humanity Europe, Middle East and Africa. At European Development Days in Brussels in June 2015, Habitat for Humanity called on the EU to shift its focus from rural problems to urban land rights.