interactions between formal and informal urban land management
Article Review: “Interactions between Formal and Informal Urban Land Management:
Theoritical Issues and Practical Options”
By: Jimly Al Faraby and Aliya Gul
Authors are students at International Joint Master Program SPRING, TU Dortmund, Germany – Ardhi
This is a critical review of an article titled “Interactions between Formal and Informal
Urban Land Management: Theoritical Issues and Practical Options” written by Carole Rakodi. It
is an extract of a book edited by Volker Kreibich and Washington Olima with the title “Urban Land
Management in Africa”, published in SPRING Research Series, Dortmund. Carole Rakodi is an
urban planner and geographer in Department of City and Regional Planning, Cardiff University.
She has worked and carried out research in range of African countries, including Zambia,
Tanzania, Zimbabwe, South Africa, and Kenya. The article describes about two forms of systems
operating in urban land management in African cities, formal and informal, and how they are
interacting. She explored some theoritical issues underlying her arguments about urban land
management system in Africa and provided several practical evidences based on experiences
from several African cities. She started by describing how land market operates in practice in
African cities. Based on the fact that land market is imperfect, then there must be intervention
from appropriate institutions to ensure that it will work well. However, dynamics taking place in
reality have raised two forms of rules governing land, formal and informal system. Under this
framework (formal and informal system), she explained its relation to the land market, property
rights, and infrastructure provisions.
In introductory part, she pointed out the uniqueness of land market. Unlike any other
commodity, land is a unique commodity because it has geographically fixed location which gives
it unique characteristic. There will never be two pieces of land with exactly the same situations.
She also highlighted the fact that land market is imperfect market because buyers and sellers
have imperfect knowledge, so that the transaction costs are high. Assumptions of neoclassical
economy theory (that buyers and sellers have perfect information, market transactions are
costless, and supply respond easily to demand) are invaild in land market. Therefore, it is argued
that government interventions are needed to organise market so it works better, making
transactions easier and therefore increasing supply.
She made reference to the argument from New Institutional Economics (NIE) to explain
how state interventions on land market can be justified. According to NIE, institutions are needed
as rules of the game to shape human interactions (North, 1990). With respect to the land market,
state interventions are needed to rule relationships between actors and their behaviors in the
market, such as decision whether or not to sell, subdivide and/or develop land. Another
justification for state intervention that she mentioned is that because private market does not take
Page 1 of 5
externalities into account, especially when it deals with the demands of infrastructures and
impact on adjacent occupiers. Therefore, state interventions are needed to ensure that economic
provision of infrastructure possible, which will reserve land for public purposes and protect
occupiers’ property rights. In addition, to justify state interventions on infrastructure provision, she
referred to the characteristics of infrastructures, which are public good and subject to market
State interventions governing land are formal, provided by legislative framework.
However, to access land through formal market is very often time consuming and cumbersome,
involves a large number of steps, especially if the land is provided by government agencies.
Even land reforms emerging in some African countries in 1970s, such as nationalisation and
conversion from freehold to leasehold, stimulated by rising price in formal property market still did
not solve the bottlenecks. Even though it is argued that large publicly owned land will resulted in
relatively well-planned urban development (as shown in Abidjan 1974-1981, Conakry 1963-1985,
and Malawi in the mid-1970s), public land provision still experiences shortcomings, such as
complex procedures and lack of financial, human and technical resources in the process of
survey, allocation, and registration. Moreover, equity of access to land is also questioned
because formal rules are considered as a means to secure power, rather than a reflection of
mutual accommodation between state power and citizen’s rights; and they can use them to
benefit their own clients. Therefore, in practice, formal land supply in African cities has brought
problems of inefficiency, bureaucratic delay, and corruption to the process. In parallels, formal
infrastructures provision has deteriorated the quality of services due to underinvestment in
maintanance and poor management.
As the consequence, the formal rules are ignored, and formal procedures are bypassed.
Informal rules emerged as alternative for land supply system. It involves a range of different
channels, such as squatting, commercialized and non-commercialized customary allocation, and
illegal subdivision of either privately or publicly owned land. The land development process in this
system is different from the formal one. In formal system, the process starts from planning, and
then sequentially continued by servicing, building, and occupation. While in informal system, the
process is the opposite, starting from occupation, and continued by building, servicing, and
planning. Therefore, land in informal areas is mostly unattractive for speculators and higher
income households due to insecurity, lack of infrastructure provision, often poorly located, and
expensive to service. However, she clearly pointed out an important aspect of informal system,
namely informal institution. She argued that even in informal system, it has its own “rule of the
games” which can organize the “players” and their behaviors in land market, by saying:
“In each of informal supply systems, rules or institutions apply which are generally
understood by and mutually acceptable to the parties concerned. Such rules may
apply to tenure; registration and plot boundaries; transfers and price settings; and
Page 2 of 5
landuse regulations and layouts. […] Although markets cannot function without
such rule-forming and enforcing mechanisms, they do protect their own interests,
and deprive those excluded of opportunities”.
Furthermore, with respect to tenure system, she compared between statutory and
customary tenure system. She defines land tenure as a relation between individual and
organization to deal with the land. It is not a direct relation between individual and land. She tried
to clear that the rights belong to only one person who is entitled, and nobody else is liable to any
issue regarding that parcel of land. Only entitled person can enjoy the privileges in different forms
like occupancy, usage, growing fruits, and no fear of being evicted. Entitled person has the
command to decide the inclusive and exclusives of particular land, privilege to transfer as
inheritance, gift, sale or rental within the limitations which have been agreed as per the title.
Bringing the ideas of Payne (1997), she said that there are certain criteria to evaluate the tenure
system and the top one is the rights should be clearly mentioned and well documented
privileges. The system itself and information regarding the tenure system should be wellorganized and accessible for all social classes, actors of the game and the parties of the
Statutory systems in African cities have been introduced to give a unified tenure system
by the governments through acquiring land from the indigenous people for the public use.
However, it is not fully applicable in all African cities because different arrangements of holding
systems and impact of colonization which has also contributed towards dualism of the tenure
system. It is a compact system which has some set of rules and regulations to deal with all land
matters. The roles and tasks of individuals and organizations are clearly mentioned; and policy
issues regarding public land ownership, rights for freehold as well as leasehold system, relation
between owner and tenant, credit issues and transactions matters all have a guideline. However,
statutory system has some inefficiency caused by the bureaucratic incapacities which directly
affect the land market and bring transaction to informal market. In addition, limited supply of
plots provided from publicly owned land is another factor contributing to sell the informally
subdivised plots by informal sellers.
She also compared between freehold and leasehold tenure under statutory tenure. Even
though she acknowledged the advantages of freehold in the sense that landowners are free to
use their land for unlimited time period and therefore can maximize it as collateral to get
economic benefits, she also argued that the necessity of leasehold tenure to deliver land to the
urban poor with minimum bureaucracy and to provide economic return to the state through lease
payment cannot be denied. Moreover, she argued that even providing individual title (freehold)
does not necessarily mean easy access to credit if the borrower does not have suficient income
to pay the loan.
Page 3 of 5
Unlike statutory tenure, customary tenure in many African cities is a joint possession of
rights by a family or a group of people. The rules governing land in customary system is based
on kinship relation. However, she argued that because of market pressures, customary tenure
has adapted to the needs of the market which leads to individualisation of the rights. It also
adapts the practice of government administration in its own way (informally), such as to allocate,
regulate access, regulate patterns of subdivision and use of the land, and record the
transactions. It has its ground rules regulating the actors involved which rely on community
She made a point by categorizing customary and informal tenure as illegality. She argued
that both semi-legal (customary) and illegal land tenure lead to illegal occupation of the land. She
also believed that government attitudes contribute to the emergence of such illegality. They may
encourage, tolerate, or prevent illegality depending on the benefits obtained from those
strategies. By referencing to the economic crisis in 1990s in many African countries, she showed
that political attitude toward informal system had played role in determining the situation. For
instance, in countries which are incapable to legitimate the informal system and reluctant to
acknowledge it, condition of informal settlement is so much deteriorated. In contrast, in countries
with stable economies having tried to legalize the informal sector or market up to certain extent,
the situation is relatively better. While in countries with stable political situation, having also
intervened to regularize informality, the situation has been so much improved.
Therefore, she emphasized the importance of a satisfactory tenure system for both new
developments as well as existing developed area. Administrative arrangements for registration
and titling are required to secure the tenure. It is suggested to recognize the informal tenure
either by regularization or any other alternatives. Regularization of informal system can be done
if there are political commitment and incentives, and it should not be seen as a confrontation
between the supporters of informal system and those who initiate regularization projects.
Moreover, informal system even sometimes can be involved to fill the gap in formal system when
it is appropriate, such as to solve land disputes in traditional communities.
Finally, she emphasized that direct public provision of land through nationalization is
inappropriate. However, land in state ownership is still needed to address issue of scarcity of the
land for development through the process of subdivision. The state is also suggested to play its
role as regulator to ensure efficiency of market and reduce negative externalities. And when it is
appropriate, government can exercise its power of compulsory acquisition to ensure public
She made similar arguments for infrastructure provisions. When formal method is lacking
of effectiveness to provide appropriate services and informal sectors cannot provide adequate
provision, compromise should be considered. For instances, while formal standards and
Page 4 of 5
installation should represents payment capacity of the residents, priority of particular services
should be based on technical arguments.
Through this article, Rakodi has made a useful point by referring to NIE to explain how
land markets in African cities operate. This theory can provide explanation about complexity of
institutional aspect of land management in Africa. According to North (1990), institution can be
formal and informal. Likewise, insitution organizing land market in Africa could be either formal or
informal. Both have their own actors and rules which are understood and accepted by the
respective parties. This theory also provides guidance to analyze urban land market, especially
in African cities. Therefore, understanding urban land market in Africa may not be possible until
rules, actors involved, and their behaviors in the both formal and informal market are understood.
However, informal does not necessarily mean illegal. Experience from land tenure, for
instance in Tanzania, shows that land tenure cannot be simply distinguished as legal and illegal,
or formal and informal tenure. It has some layers overlapping each others which make tenure
system complex. The author has also touched this point at a glance. To some extent, sometimes
informal system applies legal procedure or gets recognition from formal system, and therefore
cannot simply be judged as illegal.
Furthermore, through this article she tried to argue the importance of reconsiling formal
and informal system due to weaknesses and strengths in respective system. In land tenure, she
seemed to support regularization of informal system, while in infrastructure provisions she
suggested a compromise between the two. In the context of African cities, it sounds reasonable.
With the long history of dualism in land tenure and strong traditional customs, obviously it is not
easy to immediately transform the informal system into formal. Immediate transformation may
stimulate negative reactions by residents and undermine social structures in communities. In
addition, government does not have capacities to deliver immediate transformation either.
However, government is still responsible to ensure public interest and protect property rights of
residents. Therefore, what she suggested that government should focus on improving its
capacities as indirect provider, such as titling, registration and regulation; and providing
incentives to engage informal actors in the process is an appropriate way to improve the
Kombe, W. J & Kreibich, V. (2001). Informal Land Management in Tanzania and the Misconception
about Its Illegality. Paper presented at ESF/N-Aerus Annual Workshop: Coping with Informality
and Illegality in Human Settlements in Developing Countries. Leuven and Brussels.
Lamba, A. O. (2005). Land Tenure Management Systems in Informal Settlement: A Case Study in
Nairobi. (unpublised Master Thesis). ITC Netherlands. Enschede
Marx, C. (2007). Do Informal Land Markets Work for Poor People?: An assessment of three
metropolitan cities in South Africa: Synthesis Report.Urban LandMark, Pretoria.
North, D. C. (1990). Institutional Change and Economic Performance. Cambridge University Press
Page 5 of 5