Banking on land

  • Land banks that accept land deposits and lend out plots is an idea whose time has come.

Jun 24, 2019-

The bank is not a new concept for us. Since the establishment of the first bank in Nepal in 1937, tens of banks have been established and are in operation. The basic function of a bank is to make money available for investment or consumption on a comparatively larger scale by collecting small and scattered monies among us. However, during the early stages of introduction, people used to hesitate to open accounts and make deposits. This is still the case in some remote areas.

But many of us may not be aware of banks which accept land instead of money. In the same way, we may never imagine that some day we will be able to request the bank to lend us land. However, accessing credit for the purchase of land is quite common to us. In many parts of the world, there are banks that accept land deposits and lend out plots like our banks lend money. These banks are called land banks. The term land bank was first introduced in Nepal in the National Agriculture Policy 2004. Later, the Agriculture Development Strategy, implemented in 2015, also has a provision for a land leasing corporation. The Agriculture Development Strategy has defined a land leasing corporation as an institution that provides intermediation between owners of land and prospective renters of land. The budget statement for the fiscal year 2019-20 announced the establishment of land banks. Therefore, it is urgent to define the term land bank and to have a common understanding of the concept.

International practices

Globally, there are several land banks, but all of them do not have the same concept and core function. Some land banks are only called land banks but they function like a normal commercial bank. An example of such a bank is Landbank of the Philippines. But there are land banks which focus on the revitalisation of abandoned lands mainly due to deindustrialisation and other similar factors. Examples of such banks can be found in the US, the UK, Australia and other countries.

In India, a majority of land banks are cooperative based and quasi-commercial institutions which aim to protect farmers’ welfare, especially regarding land acquisition. Taiwan started a state-owned land bank after the Second World War to implement land policy, especially the land-to-the-tiller programme. The Land and Agricultural Development Bank of South Africa is also a state-owned bank that provides financial services to commercial and emerging South African farmers. Recently, Grenada, St Lucia and St Vincent and the Grenadines started the Agriculture Land Bank Project with technical assistance from the Food and Agriculture Organisation of the United Nations.

In contrast to these land banks, Nepal requires a different model of land bank. Our need for land banks is not for the development of big housing and apartment projects. Land banks in our context should deal with the efficient allocation and utilisation of agricultural land. The average Nepali landholding is less than half a hectare, which means a majority of land holdings are struggling to achieve economies of scale. Nepali farming also suffers from labour crowding in some parts of the country and labour scarcity in other parts. These structural problems have resulted in a less efficient agriculture system.

Many state that youth outmigration is a serious threat to the Nepali agriculture system. However, some youths who have out-migrated are returning with exposure, enhanced skills and some capital. These youths with aspirations are trying to start an agriculture farm with innovations. More importantly, the government of Nepal is also helping them with special and targeted programmes—youth-focused programmes, programmes for returnee youths and many others. However, due to limited availability of land, their potentiality has not been fully exploited. Moreover, the issue of land ownership and entitlement is preventing the exploitation of the full potential of the Nepali agriculture sector.

Land banks can be a good instrument to address these issues. The concept of land bank in our context should be an institution which accepts land deposits and lends land to seekers in line with the land use policy. Land banks will have additional responsibilities compared to commercial banks. These responsibilities are implementing land pooling according to the suitability of land by considering various aspects including soil type, aspect, slope and others; providing agribusiness incubation services; ensuring appropriate soil management practices to prevent over-exploitation of the soil; developing and maintaining a geographic information system-based land information system; and ensuring due implementation of land use policy.

Misconception about land banks

Even though the concept of the land bank is not widely known, different views are not uncommon in Nepal. Some people who are against the idea argue that land banks collect land parcels from smallholder farmers and lend them to big corporations who will exploit them. This argument is similar to the primitive banking awareness of the general public due to which people used to hesitate to deposit money in banks. The main issue used to be people’s trust in banks. In the same way, some people are wary about land banks, but we can address their worries.

Land banks are new to us. Therefore, their establishment on a nationwide level would not be a wiser decision. Moreover, considering the changed political and administrative context of Nepal, piloting land banks at the municipal level is highly recommended. Generally, in the US, land banks are operated by municipalities. Local governments better know their land and understand its value. Considering their current limited capacity, federal and provincial governments should act as a backstop.


- GC is an officer at the Ministry of Agriculture and Livestock Development.

Published: 24-06-2019 09:32

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