Poor Property Rights Limit Entrepreneurship

Entrepreneurs the world over face a common constraint: how to get the credit they need to grow, or maintain, a business. Entrepreneurs in the developed world often make use of their home (if they own one) as collateral for a business loan. You borrow and secure the loan with the house; if you fail to repay the bank gets your real property. There's little problem in terms of male v. female borrowers in our part of the world. Women have good access to credit these days.

That's not how things are in Africa. In most cases, people just don't have titles to their homes--the government hasn't created a viable system to title individual property. In many other cases property is titled ONLY in the name of the "head of the household," who is most commonly considered to be a man. It's typically not possible for women who are married according to custom (i.e., not in a state-sanctioned civil ceremony) to jointly register the title to their home with their spouse. Married women must ask husbands for permission to use the house as collateral and this proves exceedingly difficult for most of them. And women whose husbands die face special, and heartbreaking, difficulties: they are often thrown out of their marital home by their husband's family. They face a stark choice: marry a brother-in-law or fend for themselves (and their children in most cases) somehow, somewhere.

The problems women face in Africa because they do not have secure property rights also seriously impact their ability to be successful entrepreneurs. Few women can rely on their house as collateral for a business loan. And, because so little moveable property in Africa is available for use as collateral, they can't use other things they may control, such as business inventory or cattle, to secure a loan. This all adds up to serious limitations on how far a successful woman can take her business. Microcredit is one option, but microcredit covers a surprisingly small percentage of the potential borrowers in Africa.

This story from the UN's news service, IRINNews, discusses some of the problems that women in Liberia are facing because of a difficult property environment: they do most of the market trading in the country but face legal restrictions to accessing credit PLUS social norms that make men hesitant to lend to them. Here's a social enterprising challenge: find a reliable and inexpensive way to get these women their titles as well as more access to credit!


- Karol