This indicator evaluates whether and to what extent governments are investing in secure land tenure and property rights.
Relationship to Growth & Poverty Reduction
Secure land tenure plays a central role in the economic growth process by giving people long-term incentives to invest and save their income, enhancing access to essential public services, allowing for more productive use of time and money than protecting land rights, facilitating use of land as collateral for loans, and contributing to social stability and local governance. 1 Improvements in tenure security also favor growth that is “pro-poor” because the benefits generally accrue to those who have not possessed such rights in the past and those who are affected most by high property registration costs. 2 Land policy reform can be particularly meaningful for women: research shows that when women have secure access to land and are able to exercise control over land assets, their ability to earn income is enhanced, household spending on healthcare, nutritious foods, and children’s education increases, and human capital accumulation occurs at a faster rate. Women’s ability to inherit and possess control rights to land also serves as a crucial social safety net. 3 Beyond land, property rights generally contribute to economic growth and poverty reduction. 4
This composite indicator is calculated as the weighted average of three indicators. Access to Land is weighted 50% and Days and Cost to Register Property are each weighted 25%.
- Access to Land: Produced by IFAD, this indicator assesses the extent to which the institutional, legal, and market framework provides secure land tenure and equitable access to land in rural areas. It is made up of four subcomponents: (1) the effectiveness of the land tenure system; (2) the effectiveness of land markets; (3) the equitable management of communal lands; and (4) the existence of gender based impediments to access. IFAD’s operational staff base their assessments on a questionnaire and guideposts identifying the basis of each scoring level, available at https://webapps.ifad.org/members/gc/42/docs/GC-42-L-6.pdf or https://webapps.ifad.org/members/eb/125/docs/EB-2018-125-R-4-Add-1.pdf. Past datasets can be found in the documents of IFAD’s governing council https://webapps.ifad.org/members/gc.
- Property Rights (v2xcl-prpty): Produced by the Varieties of Democracy Institute (V-Dem), this index measures the rights to acquire, possess, inherit, and sell private property, including land. It measures both de jure limits on legal property rights, but also de facto limits that may come in the form of customary law, religious law, common practice, or social norms. This indicator is assessed separately for men and women, and then averaged together. V-Dem gathers these data by surveying experts and aggregating their answers into a single index. More information on V-Dem’s methodology can be found here https://www.v-dem.net/en/our-work/methods/.
MCC Aggregation Methodology
MCC’s Land Rights and Access Score = [ 0.5 x Normalized IFAD ] + [ 0.5 x (Normalized V-Dem) ]
This index draws on 2018 “Access to Land” data from the International Fund for Agricultural Development (IFAD) and 2020 data from V-Dem on Property rights (v2xcl-prpty). Country scores are reported on the Scorecards as 2020 data. When IFAD data from the current year is missing, normalized data from V-Dem is used. When V-Dem is missing data, the indicator is considered missing and a country will receive an N/A for this indicator on the scorecard.
Since each of the two sub-components of this index have different scales, MCC created a common scale for each of the indicators by normalizing them. Please see equations below. Both scales are inverted so that a higher score corresponds to better performance.
MCC Methodology to Normalize IFAD and V-Dem Data:
- Normalized IFAD = 1 – ((Maximum observed value – Country X’s raw score) ÷ (Maximum observed value -Minimum observed value))
- Normalized Property Rights = 1 – ((Maximum observed value – Country X’s raw score) ÷ (Maximum observed value -Minimum observed value))
For example, to calculate a given country X’s score, MCC first finds the maximum and minimum value for that year. MCC then subtracts country X’s score from the maximum to get the numerator and subtract the minimum from the maximum to get the denominator. MCC divides the numerator by the denominator to get the inverted normalized value. Next, MCC subtracts this quotient from 1, to get the normalized value for a country. Finally, MCC averages the normalized values for each source together. If IFAD is missing, the normalized V-Dem score is used, but if V-Dem is missing the indicator is considered missing and assigned an “N/A” because V-Dem has higher country coverage and more recent data.
In FY22 MCC revised its methodology for this indicator to expand the populations and concepts covered and to focus more on broad-based property rights. As a result, the scores from FY22 are not comparable to scores from FY21 and earlier. For more information about how MCC is making these business climate indicators more inclusive, visit https://www.mcc.gov/blog/entry/blog-101921-financial-inclusion.