Land rental

Introduction

A well-functioning rural land rental system allows landholders who are unable to farm their land, due to a lack of finance or physical ability, to rent their land to more productive farmers as a source of income, as well as increasing the productivity and income of households renting the land.

The current rural land rental system in Ethiopia, however, suffers from several constraints and inefficiencies. Most land rental transactions are inefficient, informal crop sharing arrangements between family and community members. Farmers have traditionally been reluctant to engage in cash rental transactions outside of family or close friends and potentially get a better price, due to having limited information on potential tenants (for people looking to rent out land) or available land (for people looking to rent in land) as well as rental prices. Farmers are also reluctant to rent land to people outside their family and community due to the uncertainty of recovering the land after the rental period has expired.

The improved tenure security provided by SLLC presented an opportunity to improve the functioning of the rural land rental system. To address this, LIFT worked on several initiatives within the rural land rental market to improve landholders’ ability to rent out or rent in land based on their needs, improve their knowledge of rental prices, and ensure that rental agreements entered into by landholders are secure, protecting the rights of both landholder and tenant.

Improving land rental processes and procedures

LIFT focused on establishing formal rental agreements, to ensure they are binding and enforceable. LIFT introduced a standard land rental contract for all rental transactions, as well as procedures for these contracts to be registered both at the land administration office and on the rural land administration system LIFT was installing. This provided both parties under a rental transaction with the assurance that the transaction was legal and secure, so that smallholder farmers and vulnerable groups could rent in or rent out their land confidently, formalise their land rental agreements speedily, and experience the benefits of formally registering the rental agreements.

Developing a sustainable system of information on land rental availability

LIFT established a network of land rental service providers and trained these to provide landholders with information on land rental availability, so that smallholder farmers and vulnerable groups could rent in or rent out land at fair and competitive prices.

Raising awareness

LIFT aimed to make all relevant stakeholders including the land administration office, smallholder farmers and vulnerable groups aware that renting land in or renting land out is legally and culturally acceptable and can bring significant benefits, for example improved access to productive land for landless youth and increased rental income for women and elderly people who may not have the resources to farm the land effectively.

What are the benefits of a formalised rental market

SLLC and RLAS increase transparency in land rental transactions

Through SLLC and RLAS, landholders and tenants know the exact size, landholders and location of a plot. They also know if the plot has already been rented out to someone else or has any encumbrance when applying for a loan.

The standard land rental contract form increases tenure security and makes it easy to register transactions

The standard land rental contract form is a rental agreement template that has been approved by the federal and regional governments of Amhara, Oromia, Tigray and SNNPR. It presents all relevant details of a land rental transaction and is designed for easy processing by kebele and woreda land officers.

The registration process ultimately ensures that landholders, tenants and land officials all have the same up-to-date information on the status of a plot. Landholders and tenants can both trust that their rights are protected and enforceable in case of a breach. The result is not only a more secure rental market, but also one that is more vibrant and competitive, with more actors gaining access.

Land rental service providers (LRSPs) lighten the burden of land officials

LRSPs are elected by the community and local administration. They provide access to information on available land and connect landholders and tenants. They ensure landholders and tenants have access to market information and correctly fill in the standard rental contract form, which they then take to the kebele or woreda offices for registration.

Impact

• The formalised land rental contracts are attracting first-time landlords and tenants and providing new opportunities for farmers.
• Formal land rental agreements benefit women, as 42% of people renting out their land are female and cannot provide enough labour to make full use of their land for additional income.