Mint has an interview of Hernando de Soto today, where he talks about how clear property titles empower the poor, and what India needs to do about this.
Hernando de Soto is a Peruvian economist. His major insight was that poor people may own or occupy land and houses, but the legal status of this property usually isn’t clear. So, even if they aren’t actually occupying anyone else’s property, they can’t reap the full legal benefits of this.
The legal benefits of this include:
- Being able to establish a proof of residence (important whenever you need to get something that requires a billing address- phones, bank accounts, credit cards, and so on)
- Reducing the risk of living in a neighbourhood classified as a ‘negative area’ by a bank, and so losing out on access to credit – this is a huge problem in India.
- Being able to borrow against your property, which provides capital to start a business, meet unexpected expenses, and so on.
He has written a book called The Mystery of Capital in which this is explained in detail. Unfortunately it is also explained very badly, and the book is very complex and difficult to get through. Tragically, the Mint interview is the same, and his answers are very long and complicated, though still very insightful if you can penetrate them.
However, the last paragraph has this great quote:
But if you are able to document your extra-legal sector, document its entrepreneurality, and show how that could be many times better if it takes place within the rule of law, it has got to motivate politicians. You have got to say, if you do this, it will increase your votership by 20-30%. Then you will win. That’s the way politicians think.
Related post: this one, with a link to Gautam Chikermane in the Indian Express talking about de Soto and property titles.