Acceptability of residential licences as quasi-land ownership documents: Evidence from Tanzania

Most of the property owners in developing countries particularly those residing in informal settlements do not have formal land ownership documents, which weakens security of tenure and denies them access to credit. In addressing the problem, various initiatives have been taken but some of them have not been very effective. This paper uses a case example of an upgraded informal settlement in Tanzania to assess acceptability of residential licences as quasi-land ownership documents among property owners and lending institutions. Findings show that security of tenure, access to credit, property value enhancement, land conflict resolution and guarantee for compensation are the main factors that attract property owners to apply for residential licences. On the other hand, short life span of residential licences, exposure to multiple taxation and land rent, complex application procedure and lack of knowledge on residential licence uses are the main factors accounting for low residential licence application. Findings also show that some property owners do not use residential licences as collateral due to low financial literacy and fear of losing property in case of loan default. Although findings also show that many banks accept residential licences as collateral, it is also clear that having a residential licence without owning a business or having a regular income stream is not enough for a property owner to qualify for a loan because lenders are more interested in borrowers’ ability to service the loan rather than mere possession of a land title or its equivalent. Knowledge of these factors is important in devising appropriate interventions that, apart from placing much emphasis on formal land ownership documents, take on board all key factors that hinder land owners from effectively utilising their land for capital and income generation.