Increasing Customer Uptake of Property Registration Services

Scarce land and property documentation plagues the developing world: over 1 billion people have insecure property rights. The inability to demonstrate secure property rights, particularly among low-income households, remains at the core of the world’s most pressing challenges: conflict, gender-based violence, hunger, poverty, and vulnerability to disaster. Put another way, secure property rights—both formal and informal—are a foundational asset upon which livelihoods and stability are built.

The Future of Land and Housing Program at New America, in collaboration with Suyo, a social enterprise that provides tech-enabled land rights services to low-income households in Colombia, has produced a series of briefs to explore innovative approaches for demand-driven property registration. This is the third brief in the three-part series. This brief focuses on the barriers to customer uptake of paid property registration services, and provides suggested solutions.[1]

Understanding Uptake of Property Registration Services

Why Households Don’t Register Property

Despite the established benefits of secure property rights and formal documentation, market research has shown that people are often unable or unwilling to pay the full price of property documents.

Why?

A. High Costs and Limited Capacity to Pay:

Producing land documents is expensive, particularly in countries where systematic land registration is not the norm. Many developing countries have few surveyors and other property experts, and these professionals charge high fees for analyzing cases, collecting data and ensuring quality control. Uganda, for example, has an estimated 15 million parcels of undocumented land and only a few dozen registered surveyors. It would take these professionals more than 1,000 years to document and register those parcels.

Add to that the cost of legal review, printing and delivery, registration, fees, taxes and other items, and land documents can become expensive, quickly. For example, Suyo found that in Colombia, transaction taxes and government fees sometimes account for 79 percent of the final cost of a land title. Across sub-Saharan, Latin America, and South Asia, for example, the cost of registration averages nearly seven percent of a property’s value. And, because governments are often unmotivated to lower registration costs because they rely on them for revenue.

Households who lack land documents are often low-income, and may have limited ability to afford them. For example, Suyo found that 97 percent of its customers are low-income. Not only that: households may not have cash on hand to afford a large lump sum; for that reason, financing options like the ones Suyo has experimented with may be critical for allowing poor households to accord documentation.

Low-income customers often cannot afford to meet all of their needs, and so must prioritize the immediate, daily ones like purchasing food and paying school fees.

Even when households ostensibly have the funds for property documents, other logistical and bureaucratic factors get in the way. Both the NGO Cadasta and USAID’s LTA project, which experimented with charging rural Tanzanians approximately $13 to receive land documents, found that customers had trouble accessing or opening bank accounts. LTA found that rural communities often lacked financial institutions or even mobile money services, and recipients were unable to travel long distances to access funds. Second, opening a bank account took so long that “LTA lost the prime harvest time when villagers have income from sales of their produce.”

Meridia experienced the same “income lumpiness” problem when selling land documents to cocoa farmers, whose incomes are extremely seasonal and tied to the cocoa harvest. In practice, farmers were only able to afford land documents during the few months between when their annual cocoa harvest income would come in, and when that income would be spent down.

B. Barriers to Willingness to Pay:

Research shows that low income households differ in whether they are willing to pay for property documents (particularly vis-a-vis more immediate needs), and the amount of money households are willing to spend on property registration services is often less than what it costs vendors to deliver those services. For example, Suyo found that while 100 percent of customers were willing to pay COP $250,000 ($63 USD) for property documents, only 20 percent were willing to pay the average price of Suyo’s full portfolio of services.

What obstacles prevent households from purchasing property documents? Evaluating a property document as a consumer product provides some insight.

Typically, a consumer journey to purchase involves three stages:

• Awareness of their problem
• Consideration of solutions to the problem
• Decision about which solution to purchase

Let's apply these steps to a typical consumer product, for example Tylenol brand pain medication.

Awareness is created when the consumer wakes up with a headache. The consumer is aware of the problem - their head hurts. The consideration stage may involve the consumer evaluating potential solutions to their problem. Will the headache go away on its own? Are they dehydrated, and so the solution is to drink water? Or, does the consumer need over the counter medication to remedy the headache? Once the consumer decides they need medication, they come to the decision stage, evaluating which brand of medication they should purchase - Tylenol, Motrin or Aspirin? At this stage, Tylenol is pitted directly against its competitors, and the consumer is evaluating the pros and cons of each.

Applied to a land registration product, however, the journey becomes more complicated.

Awareness of Lack of Documentation as a Problem:

Households may not be aware that their property rights are insecure in the first place. This is particularly true in places where property documents have traditionally been scarce, or land markets have not been active.

Property insecurity is usually felt in the context of a transaction (for example, a parent would like to pass property to their children and needs documents in order to do so or a family is rejected for a loan because they lack formal collateral) or in the context of an outside shock that impacts the property (an earthquake destroys the home, a foreign investor purchases agricultural land next door and there are rumors of encroachment, a new Chief comes to power and threatens to reallocate land).

From that perspective, property registration can be seen as a sort of insurance - under normal circumstances, property insecurity is not a pressing problem, but property registration is helpful in the cases it becomes a problem.

Indeed, Suyo found “disinterest, lack of awareness and lack of knowledge about property formalization and benefits” to be one of the primary reasons that would-be customers refused property diagnostic services.

Even when households are aware that their rights are insecure, they may see property insecurity as an “important but not urgent” problem.

Low-income customers, like the ones Suyo, Meridia, Cadasta, and the LTA NGO seek to serve, often cannot afford to meet all of their needs, and so must prioritize the immediate, daily ones like purchasing food and paying school fees. Meridia, for example, found in its early engagement in Ghana that wealthier farmers with large tracts of land were willing to pay a full price of 100 Euros for land documents. But smallholder farmers in poorer parts of the country were significantly less willing to pay for documents, even with the help of subsidies.

Consideration of Property Registration as a Solution:

Even if customers believe property insecurity is a pressing problem, they may not be aware that a solution, in the form of property registration, exists. This is unsurprising: in many developing countries, property documents are vanishingly scant. The Global Property Rights Index (PRIndex) shows that approximately forty percent of property in Africa is undocumented, while the World Bank estimates this figure to be as high as 90 percent.

To quote Cadasta leadership: “How do you convince someone to buy something they don't even know that they need, since they've gone so long without?”

In other words, organizations offering property documents in developing countries may face the challenge of introducing an entirely new product to the market.

And yet, research by the Global Property Rights Index (PRIndex) finds that across the world, with the notable exception of Sub-Saharan Africa, people with formal property documents feel approximately 20 percent more secure than people without them. And, research shows that improved tenure security leads to strong women’s empowerment outcomes, economic mobility and opportunity, and improved job prospects. So, there is evidence that having property documents correlates with increased tenure security, and that once customers are aware of the existence of property documents, they would find these documents useful.

Indeed, Suyo found that “customers that knew about benefits of property formalization were more likely to have a greater desire to formalize and therefore, to make additional efforts to formalize their property.” Suyo spent considerable time educating customers about how property formalization can help solve their property insecurity problem.

Other customers may believe they have a formal and fully valid property document, when in fact they do not. Suyo found that some of their customers believed documents like a bill of sale constituted a formal property document, when in fact these documents would not hold up in court as evidence of property ownership. Other customers had a property title, but the title did not properly capture the characteristics of the property. As a result, these incomplete documents may not be able to deliver the full benefits of property documentation.

A related challenge is that even when households are aware there is such a thing as a property document, they might not be convinced that property documents will bring tangible benefits like increased property values, access to subsidies, or reduction in family conflict. While ample literature ties property formalization to tenure security, in contexts where property titles are rare, or where other legal, institutional or cultural barriers exist, a document may not actually make the property holder more secure. Findings from a recent study on women’s tenure security are telling: “Many factors can prevent women from realizing the full benefits of land ownership despite the fact that they hold formal titles.” These factors include everything from lack of literacy and access to bank accounts to gender-based violence through which women are retaliated against if they attempt to claim benefits their property rights bestow upon them.

Importantly, the finding is not that property registration is valueless; instead, the finding is that property registration is necessary but not always sufficient for some of the benefits that can follow formalization. But, this finding makes the pitch for property registration much more difficult. Customers must be convinced to spend time and resources obtaining a document that on its own will not be the ticket to security or to tangible, immediate economic benefits.

Indeed, when Suyo asked its prospective customers why they wanted to formalize their property, nearly half didn’t have an answer to this question.

Social venture Meridia experienced this dynamic in Ghana, where the company attempted a cost recovery model for FarmSeal land documents among cocoa farmers. Meridia found that farmers’ uncertainty that local chiefs would recognize Meridia’s FarmSeal was one of the primary reasons for low uptake of paid documentation.

A third challenge is that where property documents are provided, they are usually provided for free, by the government or by foreign donors. The drawback of the “free” model is that often documents are provided slowly and in small quantities. This, of course, is the problem that Suyo, Meridia and other organizations are trying to solve, by guaranteeing the delivery of a property document on a faster and more reliable timeline. But nonetheless, they face the challenge of convincing customers to pay for a product that their neighbors may have gotten for free.

Meridia found in its FarmSeal pilot that the presence of USAID’s ILRG project, which had previously provided land documents for free in the community, made farmers unwilling to pay for the product:

“This provision of a free service is well known to the farmers of the other three bridge phase communities, who expected that the FarmSeal service would once again be offered for free under ILRG.”

Similarly, when the LTA project changed its approach from providing free CCROs in Phase 1 to requiring customers to pay for them in Phase 2, the project found that “neighbouring villages to phase 1 villages demanded the same treatment of being assisted to obtain their CCROs free of charge.”

Decision to Purchase Property Document:

At this step, organizations like Suyo might experience an advantage, because they are often the only entity in the market offering property documents. Property registration companies may not have a head to head competitor beyond informal middlemen and individual providers, and so once a customer is convinced that they would like to purchase a property document, the step to choosing a vendor may be relatively simple.

Still, in the two places where Suyo and Meridia captured lessons learned from attempts to introduce paid documentation - Colombia and Ghana - customers were skeptical of the service being offered.

Suyo found that because customers had been disappointed so many times by government or private efforts to provide property documents, they were hesitant to trust Suyo:

“A customer could be wary of dealing with government-led processes that, in their perception, have let them down before,” Suyo found in its study.

Suyo similarly found that customers had prior negative experiences with independent lawyers and informal middlemen who had promised to formalize their land but were either unable to navigate the formalization bureaucracy or stole customers’ savings and never delivered the promised documents.

Meridia similarly found that “Some farmers did not believe that the FarmSeal documentation would indeed be issued” and “wanted to see fully signed documents with their own eyes before signing on.”

Early Insights: Increasing Uptake for Property Registration

The idea of paid property registration is still new, however organizations like Suyo, Meridia, Cadasta and the LTA NGO are beginning to generate insights to answer the critical question: under what circumstances can and will a customer pay for a property document?

These insights and strategies include:

• Increase demand through education: Suyo, Landmapp and the LTA NGO all found that educating customers about the importance of property registration and about the benefits of property documents was a critical step in building interest for their product. Suyo found showing that individuals with more knowledge about the benefits were “2.3 times more likely to have a higher WTP”, and that it could increase demand and also mitigate trust barriers by “ensuring that customers have accurate information on how to access additional and complimentary services post-formalization (where to go, requirements, etc.).”
• Target customers for whom property registration is urgent: On the whole, property registration is viewed as an important but not urgent priority. However, certain customers prioritize property documents over other needs. These customers may include elderly property occupants who are concerned about inheritance, families or small businesses who have been rejected for a loan due to lack of registered collateral, or property occupants adjacent to a planned commercial or government investment, who are concerned about being displaced. Understanding who these customers are within each market, and understanding their CTP and WTP is critical to increasing uptake for registration.
• Allow for property registration to unlock other benefits: For example, prioritize potential customers in areas where banks and other commercial institutions have introduced products that allow property to be used as collateral or otherwise assist with obtaining a loan. Or, partner with an employer (in Meridia’s case, a cocoa company, in Suyo’s case a flower company) who is willing to offer special services or benefits for employees with registered property. For example, Suyo recommends developing partnerships with actors from the financial sector, home improvement and construction sectors, all of which could provide services and benefits for customers with formal property documents.
• Rely on early adopters to spread the word: Cadasta, LTA, Suyo and Meridia all found that one of the determinants of whether customers would pay for land documents was whether someone they knew had already purchased those documents. This insight is in line with marketing orthodoxy: a Neilsen study of consumers in 60 countries found that recommendations from friends and family are the most credible form of advertising. The study found that 83 percent of respondents trust the recommendations of friends and family (compared to 63 percent who trust TV ads, for example). LTA, for example, advises that “successful villages on [the] beneficiary contribution model should work with LTA – NGO to visit other villages and tell their success stories to promote contributions.”
• Offset the costs of property registration: As described above, property registration can be expensive, in some cases costing several months’ wages. Suyo’s property formalization services cost approximately two months’ salary for its customer base. Similarly, Meridia’s offering often costs multiple months’ salary for the smallholder farmers they serve. Finding creative arrangements to subsidize the high costs of property documents is therefore critical. This involves up-front market analysis, including understanding local wages, levels of tenure insecurity, and access to credit, and developing pricing models to respond to these demands. Brief #2 discusses attempts to do so in more detail.

Learn More

The purpose of this final brief was to outline challenges and lessons learned related to increasing uptake of paid property registration services. This brief follows two prior briefs New America's briefer series, examining the following questions:

1. What is the current landscape for demand-driven land formalization services, and what are the main challenges that these services have sprung up to respond to? (Access brief #1 here.)
2. What different models exist to finance property registration services for low-income households, and is any approach more effective than others? (Access brief #2 here.)

Insights to these questions can also be found in Suyo’s recent report, Learning for systems change in property rights formalization.

Contact

Thoughts or questions? Contact Yuliya Panfil (New America) at panfil@newamerica.org.

Endnotes:

[1] Development experts variously, and sometimes interchangeably, use the terms “documentation,” “formalization,” and “registration.” For the purposes of this briefer series, “documentation” refers to basic data collection on property rights and the issuance of some document, whether official or unofficial, based on that data. “Formalization” involves official recognition of rights by national land agencies and/or other government actors. Increasingly, however, customary land rights are being formally recognized, and a gray area exists in the discourse as to whether this is considered “formalization.” For sake of simplicity and inclusivity, we will use the term “registration,” which captures both “documentation” and “formalization,” recognizing that certain services, such as Suyo’s offerings, may be significantly more expensive or difficult to provide precisely because they offer formalization in addition to documentation. Where appropriate we make this distinction.