Most of us know land is an important factor of production. Many of us will even let it lay idle because we think it will appreciate in value as time goes on. But how many of us actually use it to get equity in terms of cash which one can then use for other developmental needs when used as collateral for credit financing?
Naturally, banks will ask for a title deed. But more often than not, many customers don’t have one due to the different land ownership systems currently in Uganda.
The Constitution recognises four types of land tenure systems in Uganda; Customary, Mailo, Freehold and Leasehold.
The Mailo Land Tenure system is peculiar to Buganda. It arises from the 1900 Buganda Agreement between the British government and the kingdom of Buganda.
By this agreement, chunks of land were given to some individuals to own in perpetuity. The Buganda royal family received 958 square miles as private mailo land while chiefs and other notables received eight square miles each.
The peasants who previously occupied this land were not recognised and became tenants, meaning they had to pay rent, (commonly known as busulu) to the landlord. The mailo owner was and still is entitled to a certificate of title.
In western parts of the country, freehold land tenure is the prevailing system. This involves owning land in perpetuity under agreements arranged between the various kingdoms and the British government.
Grants of land in freehold were made by the Crown and later by the Uganda Land Commission. Under this system, the grantee of land in freehold was and is entitled to a certificate of title. Most of this land was issued to church missionaries and academic institutions.
Leasehold is a system of owning land on contract. A grant of land would be made by an owner of freehold or mailo or by the Crown or Uganda Land Commission to another person for a specified period of time. Certain conditions are attached including but not limited to the payment of rent.
In addition, a person granted a lease for a period of three years or more is entitled to a certificate of title.
The customary system is where the land is owned communally, perhaps by a clan. It has two broad classifications; communal customary tenure predominantly found in the northern and eastern parts of Uganda. Then there is the individual/family/clan customary tenure prevalent in central, western, parts of the north and southwestern Uganda.
Customary tenants could be in occupation of mailo-land, freehold, leasehold or public land.
Because of these many land tenure systems, banks are in a sticky position and obviously require authentic documentation be it freehold, mailo or leasehold land.
Yet, there are those, especially under mailo, who do not necessarily have titles to the land but hold bibanja agreements which recognize them as occupants but not necessarily owners of the land.
Until now, their chances of applying and getting approvals for affordable financial solutions have been limited or non-existent.
What we have done as a bank, is to go further down the ecosystem. To begin with, we are offering those with dwellings on Kabaka’s land the opportunity to apply for financing solutions to enable them to process land titles.
This is highlighted in our new partnership with the Buganda Land Board. Under this arrangement, the financing conversation starts at the point of obtaining a title through the Buganda Land Board’s land access financing initiative, Kyapa Mungalo, (title-in-hand) scheme.
Bank approval means one will have the money to acquire the leasehold title and can still get more funds as an equity release or fund completion once the title has been delivered to the bank.
This solution is available to both salaried and self-employed customers. We grant repayment periods of up to 24 months at the best interest rates in the market and the entire loan process to disbursement lasts not longer than 48 hours.
Because the journey to owning a house in Uganda usually starts with acquiring land, we have made the process easier by providing the financing means irrespective of land tenure. The benefit of this is that instead of keeping the purchased land in speculation, hoping that it appreciates in value before it is sold, we now offer a solution that enables the client to release equity and get cash out against the estate they already own.
These funds can help one start construction and the bank would in turn finance the completion. Other than the construction or development of the same land, the cash can alternatively be used for diversification of one’s business or recapitalization.
Jackson Emanzi is the head of home loans at Stanbic Bank Uganda.