If land reform is efficient method of promoting development, why is it so rare?
The major aim of land reforms is to promote the economic development of a country or a particular region. The most common land reform approach is state-controlled land reforms where the state seeks to promote land redistribution to contribute to the socio-economic development of a country. Land redistribution initiatives focus on promoting rural development and are part of regional planning. Other strategies involve the provision of land acquisition funds to the landless to purchase land.
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Land reforms face challenges in applying the land reform policies in a particular region and as a result, land reforms are not effective in most countries or regions. Other challenges, which make land reforms unpopular, include political interference and misappropriation of land funds by leaders affecting the implementation of land reform policies.
State-controlled land reforms normally involve the redistribution of land acquired from private owners to the landless to alleviate poverty. Governments also promote land reforms through the provision of loans to the landless to buy land. However, this strategy affects free land use since it involves various regulations besides infringing on the rights of private landowners. Also, it encourages illegal land allocation due to political interference associated with government-controlled land reforms making it unpopular.
The civil societies such as nongovernmental organizations (NGOs) play a key role in land reforms in partnership with the state agencies. The civil society groups advocate equitable land distribution among the rural poor on top of starting initiatives aimed at empowering the poor economically through training. However, the effectiveness of civil society-led reforms is often under political influence. Also, internal organizational problems derail the efforts of civil societies in implementing land reform policies in most countries.
The international community’s involvement in land reforms includes designing appropriate land reform strategies that ensure fair land reforms that depend on market forces with minimal state intervention. The World Bank initiates various land reform projects where government initiatives fail. Also, the World Bank provides capital to governments for land purchases from private owners for redistribution to the landless. Other international donor organizations such as the International Fund for Agricultural Development (IFAD) provide initiatives that aim at increasing access to the rural poor. However, the involvement of the international community requires state participation in land reforms.
Lack of political will and support reduce the international community’s participation in land reforms in a country. Land reforms require a partnership between civil society, the state, and the international community. State-led land reforms often face political influence while civil society and the international community’s participation in land reforms require government support. Proper land reforms are important in the reduction of poverty among the rural poor, especially in developing countries.
How important is foreign aid in relation to their other sources of income?
Foreign aid plays an important role in stimulating economic growth in developing countries. Foreign aid helps to stimulate economic growth by supplementing other domestic sources of income such as savings. Foreign aid contributes to the economic growth of the receiving country in several ways. First, it increases domestic investment in physical infrastructure such as roads and railways, which helps to stimulate economic development by promoting domestic and international trade. Also, foreign aid promotes investment in human capital through the building of schools and training institutions, producing a skilled workforce that drives the economy. However, foreign aid on economic development does not always contribute to economic development in most cases
Foreign aid has some advantages over other domestic sources of government funding such as savings or domestic borrowing. Domestic sources of income have limited capacity to import goods or services from other countries. Foreign aid, on the other hand, increases the capacity of a country to import valuable products and technology from other countries. Also, foreign investments in various sectors of the economy contribute to economic development.
Foreign aid also contributes to technology transfer between industrialized nations and developing nations. Technology spurs economic growth by encouraging the development of technical knowledge in developing nations.
Odious debts involve the debt crisis currently faced by the developing world due to default to repay the loans granted earlier by international financial institutions. It started in the 1970s with less developed countries (LDC) borrowing money from international money lending institutions and failing to repay, followed by borrowing more to service the initial loan leading to a major debt crisis. The lending practices of the commercial banks also contributed to the crisis. Additionally, the loans were in the form of bonds and direct infrastructural investment, which contributed to the default. The governments of developing nations directly obtained loans from foreign commercial banks without involving the foreign government.
Various strategies have been proposed to resolve the problem of odious LCD debts. The odious debt strategy involves the cancellation of the loans granted to nations unable to repay while at the same time offers guidelines to prevent odious lending. An agreement reached by the G7 governments proposes to relieve the third world countries of odious debts and regulate international lending. The IMF and the World Bank have the role of regulating international lending.
Under this agreement, legal agreements are required when foreign governments borrow funds from international money lending institutions. The lending process has to be approved by lawyers of both the lending institution and the foreign government.
The IMF and the World Bank’s involvement in the odious debt strategy aims at reducing the recurrence of improper lending practices in the future. The lending agencies have the sole role of authorizing multilateral and bilateral loans between countries after considering certain conditions. Under these conditions, a country must implement structural and economic reform policies before qualifying for international financial aid. The odious debt strategy ensures that countries put into the proper use of loans borrowed from international financial institutions. This strategy also promotes proper money lending practices by the international financial institutions to prevent the recurrence of the debt crisis in future
What is the role of micro-finance in developing the informal sector?
Microfinance comprises the financial institutions that offer small-sized financial services including lending and borrowing to the rural and urban populations involved in the informal sector. Microfinance institutions often specialize in providing financial services to low-income earners in the population. Microfinance institutions range from rural savings and credit co-operations to small community-owned commercial banks. Most countries’ microfinance practices remain unregulated whereby the rural poor directly obtain donor funds from developed nations as credit through the microfinance institutions. In other countries, the regulation and supervision of the microfinance sector are common.
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Microfinance plays a significant role in the development of the informal sector particularly in the rural areas of developing countries. Microfinance offers a wide range of financial and non-financial services to many segments of the rural population. Their financial services include micro-credit and micro-savings services to rural farmers. Microfinance services also target small entrepreneurs in non-agricultural economies such as traders, manufacturers of commodities, and service providers. The microfinance sector faces several challenges in most developing countries. The limited business skills of rural entrepreneurs prevent the microfinance from expanding. Also, cultural issues prevent people from engaging in certain economic activities that can generate more income.
Agricultural-based microfinance services in developing countries contribute to economic development. The provision of funds for the purchase of farm inputs including seeds and fertilizer promotes agricultural productivity that helps to sustain the rural economy. Additionally, microfinance also provides loans to non-agricultural enterprises to enhance a diversified economy. Non-agricultural enterprises such as trade and manufacturing services help to supplement income derived from agricultural activities. Financial and non-financial services provided by the microfinance institutions help to promote economic growth and create an economy that is not overly reliant on agriculture.
Microfinance services help rural entrepreneurs involved in trade and processing to expand their businesses. An increase in agricultural productivity in rural areas not only promotes trade, but also processing and manufacturing services. Thus, micro-credit to rural entrepreneurs increases food production and generates income for the rural poor. Also, manufacturing services and trade create employment opportunities for the rural population. The income obtained from employment contributes to increased standards of living, growth, and development of the rural economy.
Modern microfinance institutions and donor NGOs extend micro-credit services mostly to women entrepreneurs. These institutions target women entrepreneurs because of the large number of women involved in rural enterprises. Also, in most cultures, women engage in small-scale enterprises that are the major target for microfinance institutions. Women also control the budgets of most households and empowering them economically contributes to poverty reduction in rural areas.
Traditionally, cultural practices discriminated against women about property inheritance affecting their economic development; therefore, most donor-supported microfinance institutions aim at empowering women to bridge the economic gap occasioned by biased cultural practices. Over the years, the society has been running a campaign to help the girl child and the same trend seems to have infiltrated into the financial institutions. As aforementioned, women have suffered biases in economic circles courtesy of chauvinistic laws set by men, financial institutions have realized the disparity, and offering financial credits to women is the most plausible way of closing the gap.