Synthesis documents

What difference does legal title make? Alan Gilbert, 2002

    "Hernando de Soto's bestseller, The Mystery of Capital, attributes the failure of capitalism in the Third World to the lack of property titles. While this is hardly a new argument, it is acquiring renewed momentum because his is a very influential voice within Washington. On hearing his advice, Latin American governments will increase the pace of distribution of title deeds.

    "My question in this paper is to ask what difference the 'gift' of a title deed actually makes to the lives of the poor? Does it permit them to borrow money from the formal sector as de Soto and the World Bank claim? Does it open up a new world of capital accumulation for the poor because it now allows property to be transferred legally from one 'owner' to another? Or, does it in fact make so little difference that most of the so-called advantages of legalisation are a sham?

    "Using data gathered in the now legalised self-help settlements of Bogotá, I will question each of the main benefits of legalisation. I will show how sales are sometimes more frequent when people lack legal title, how informal finance is available from the initial formation of an illegal settlement and how little formal finance is forthcoming after legalisation. Most importantly, I will show that there is little sign of a secondary housing market developing in legalised settlements. It is hard for the poor to make money from home ownership when they cannot sell their houses."