Property Rights Regime in Kenya: The Importance of Digitization

Property Rights Regime in Kenya: The Importance of Digitization

Post date: Tue, Apr 1, 2014 |

Category: General |

If you have ever taken a walk around the major towns in Kenya you will come across warning notices and signboards announcing to the world that “this plot/land is not for sale” or that “this property is not for sale.” Also, if you are a keen reader of the daily newspapers you will come across, in the back pages, notices announcing “caveat emptor or buyer beware” on some parcels of land.

And now, the National Land Commission, which is the body mandated by the constitution of Kenya to hold public land in trust, has also began placing adverts warning members of the public against buying land without carrying out background searches or relying on certificates of titles.

The reason all this is happening is that people have taken advantage of the previously weak property rights regime that allowed for exploitation and manipulation of official land and property records in order to defraud unsuspecting members of the public.

Now, we have reached this situation because of some specific reasons, the first being that the property rights regime was too weak for individuals and groups to feel that they needed to take action in order to enforce and protect their property rights, and some of them have gone to the extent of bearing crude arms and weapons in order to do this. Secondly, the main agencies and government institutions were ill equipped, in terms of how they were institutionalized, to deal with the problem, partly because the executive arm of government had too much control in land administration and management.

This was further complicated by the perceptions that people had. It is a well known fact that Kenyans still view the property transfer process as being too complicated and expensive, and are therefore only too willing to pay a little extra to a “broker” in order to have a much simpler and faster process that assures them of a specific outcome. This has over the years led to the emergence of individuals and groups or cartels who take advantage of the disorganization of the land records, to extort Kenyans of their hard earned money.

In a way the complexity and disharmony that existed in the previous property rights regime facilitated the creation of these back door services. We had too many laws that created a multitude of institutions, as well as poor coordination and centralization of critical functions that had to be dealt with at the Ministry of Lands headquarters, and a lands registry that was manual and poorly kept. Thus encouraging the evolution of a system that relied on who you knew at the lands office, and how good your network was in order to access whatever service that was required as regards property rights enforcement, transfer or administration.

The impact of this state of affairs has been quite adverse for Kenyans, many of whom hold land as the largest or most valuable asset they have. As you have seen, individuals have to spend additional funds in posting advertisements and notices, or been forced to get court orders to enforce and protect their property rights. Some have even resorted to use of force leading to loss and damage of property and even life.

Certainly small businesses have equally suffered, with many enterprises being unable to access credit because of lack of title deeds for collateral often imposed by lenders, or incurring greater expenses in checking validity of title deeds and ascertaining ownership of land. Also the fraudulent cases that are rampant in the sector involving fake and invalid title deeds, present a risk to the banking system as they have to undertake additional due diligence to determine whether a title deed is an original or a fake.

And so as we continue to applaud a class of entrepreneurs who view land as a speculative vehicle to make quick riches to the detriment of the economy yet these activities create little economic value, often leveraging their premiums on their access and proximity to key individuals in governments offices and ministries. While at the same time we bemoan the small and medium enterprises for the challenges they face not understanding that the biggest impediment for them is access to credit which is heavily dependent on land as collateral.

The constitution has created a very good opportunity as it has captured the key reforms as contained in the national land policy. The creation of the National Land Commission being a key reform priority because it is independent from the executive and it also has mechanisms for addressing this problem. A key solution is in the full implementation of the digitization of land records. This will eliminate the information hoarding that allows “brokers” to operate as it will allow for quick access when carrying out searches and verifying ownership details of the owners. The economic impact of this one reform alone would be tremendous both for individuals as well as businesses. Think about the millions of shillings lost in fraudulent land deals, and the numerous court cases involving land, the stalled cases of land succession and inheritance due to lack of cadastral information, and the relief such a system would give to both small businesses and individuals.

Therefore, while the National Land Commission continues to put up warning notices, the medium term to long term solution is in having digital land records.

More Number of the Week

Kenya’s comparison of Out of pocket expenditure on Health with its peers

In the advent of increased Non-Communicable Diseases such as cancer that require long time treatment, reduction of the Out-of-pocket payments is key in sustaining affordability and access to health care services. These can be achieved through increased insurance both by the government and the private sector.

Outstanding Stock of Treasury Bonds by Holders

Treasury bonds are a secure, medium- to long-term investment tools that typically offer periodic interest payments semiannually throughout the bond’s life. The Central Bank auctions Treasury bonds on a monthly basis, but offers a variety of bonds throughout the year, so prospective investors should regularly check for upcoming auctions. Outstanding Treasury Bonds increased by 11.2 per cent to Ksh 1,152,041 million in June 2016 from Ksh 1,035,662 million in June 2015.

Outstanding Stock of Treasury Bills by Holders

In June 2016 compared to June 2015, the stock of Treasury bills increased by 84.4 per cent to Ksh 588,088 million from Ksh 318,929 million while the proportion held by commercial banks increased by 67.4 per cent to Ksh 361,859 million from Ksh 217,742 million. In the same period, holdings by pension fund institutions increased to 20.1 per cent from 12.8 per cent while proportion held by insurance companies decreased to 3.1 per cent from 6.5 per cent.

Outstanding Stock of Treasury Bills and Bonds by Holders

The medium term debt strategy for the financial year 2016/17 emphasized on the need to develop the domestic market by increasing the issuance of Treasury bonds over the medium term. The strategy targeted a mix of 60 percent and 40 per cent for external and domestic financing, respectively.

Trends in Kenya’s Total Domestic Public Debt Stock from 1999 – 2018 (In nominal terms)

Trends in Kenya’s Total Domestic Public Debt Stock from 1999 – 2018 (In nominal terms) Source: Central Bank of Kenya The number of the Week: 2.1, this is the factor by which domestic debt has grown in the last five years. Domestic debt has nearly doubled in the last five years (2013-2018) Between 1999 and […]