Mortgage, Risk, and Taxation in Rural Senegal

Kristine Juul

There is a widespread perception that mortgage is still rare in rural Africa, as most people lack formal titles to land. In a northern cattle-trading town of Senegal, I was surprised to find out that mortgaging was rather common, and people were losing their houses and farm plots. As elsewhere in rural Sahel, land is allocated free of charge by local government or village chiefs through a small fee to cover the administrative costs, but it does not become private property. Despite this, local credit-institutions have increasingly been encouraging herders to take out loans, using their houses and animals as collateral. Local engagement in mortgages started in 2004, when various credit institutions opened branches in the town, providing people who were short of funds with an alternative to soliciting money from family and friends. While beneficial for some, these credit schemes have also led to serious indebtedness. From having acquired access to land as a function of membership and belonging, mortgaging contributes to transform people into simple tenants, at risk of losing the right of occupancy if certain economic obligations to formal sector institutions were not met.

Loans and credit are not new to the inhabitants of northern Senegal. Local livestock traders have long practiced informal credit and informal lending agreements, with large debts as a matter of interpersonal skills of networking, trust, and reputation. Furthermore, traditional rotating savings clubs (tontine) have provided funds for micro-scale activities, mainly among women (Diaw 1995; Guérin et al. 2014). Even with the arrival of formal credit institutions, these borrowing patterns have not been abandoned. What has happened is rather that people combine multiple financial tools in ongoing circuits of borrowing and repayment, where money borrowed from one creditor is used to repay another. Contrary to the intentions of the formal credit and microcredit systems, loans from formal microfinance institutions are therefore not necessarily channeled into new economic activities. Instead, people are willing to engage in formal borrowing to service their obligations in the informal sector in order not to lose face, trust and reputation.

In a town dominated by cattle trading, easier access to formal credit inevitably changes the conditions for livestock trading. As the herding sector is known not only to rely heavily on credit but also to be a risky one, formal credit institutions increasingly resort to collateral that often includes land and housing. Unfortunately, the hasty development of the sector has implied that there is frequently no proper assessment of the potential of the borrower to repay, or precise and consistent procedures for handling the collateral. The difference between formal mortgaging and “voluntary sales” often became irrelevant to debtors, as the methods used by credit agents force debtors to sell vital assets or property to meet reimbursement conditions. This was the case of a small shopkeeper who felt obliged to sell his house to avoid the shameful and counterproductive situation of having credit agents appearing at his shop “every other day” when he was unable to service his loan due to an unexpected rent increase. Evidence from my fieldwork shows that loans based on mortgage and personal guarantees are widespread. The microcredit lending market has been widely embraced by local entrepreneurs, with or without title deeds. Credit practices are therefore not limited to formal institutions but coexist and interact with informal lending practices, often in ways that reinforce existing social hierarchies.

That people engage in credit arrangements based on mortgaging does not imply, however, that people do not resist it or try to bend it in their favor. The widespread practice of recycling microcredit loans into informal loans, or taking informal loans to repay micro-loans, may solve certain immediate problems but does not alter the fact that formal social protection is in most cases ineffective or nonexistent. Frequently, default and foreclosure are prompted by illness or accidents besetting the debtor, or his or her livestock. In such cases, foreclosure can turn out to be a very expensive solution, not only for the debtor but also for the credit institutions involved, given that they are unlikely to be able to recover their outstanding claims.

Furthermore, the weak legal position of collateral creates complications for foreclosure. While plots are owned by the state and the buildings seldom represent a value equivalent to the loans taken, they are still perceived by both lenders and debtors as collateral. The lack of formal titling makes it difficult for creditors to carry out a forced sale. Courts, hampered by hazy legal frameworks, are of little help. In order to compensate for this high risk, credit institutions tend to use highly visible and punitive recovery methods to compel the debtor to comply, and impose high interest rates to recover their losses.

A more constructive pathway for invigorating the local economy may therefore be found in the provision of infrastructure and services financed through taxation. Robust public health care provision and other forms of social security may offer a fairly cost-efficient way to increase the ability of clients to service their debts and limit foreclosures. So far, the contributions of state and local government to the development of public services in northern Senegal, like in many other places in Africa, have been found wanting. This has not encouraged the population to demand greater public accountability. A more progressive taxation system would encourage residents to pay taxes and contribute to local development while gaining more secure rights over their landed assets and thereby to mortgaging.

The spatial or territorial dimension of taxation and its relation to property is an often neglected but important issue. Taxation creates and bolsters sanctioned authority in the countryside through homogeneous institutions and local representation that can ensure compliance with state regulation (see also Peluso and Vandergeest 2001). It provides an opportunity for states and local government to demarcate spatial fields in which they can exercise control. On the individual level, payment of taxes may expand the rights of citizenship, underscoring membership of a certain group and compliance with the state or other authorities, which is likely to encourage protection of the rights and properties of the citizen. Taxation is therefore one of the strategies used by individuals and companies to make or improve their claims on land and resources or their claims of belonging (Juul 2006). The spatial dimension of taxation is therefore dependent on the existence of a land market. Where land markets are poorly developed and conventional land registration systems nonexistent, taxation and mortgaging become challenging endeavors. In rural Senegal, where most land is supposed to be inalienable and is ultimately under the control of the state, neither clear property rights nor property taxation are well developed. Taxation in other forms, however, still influences security of tenure, in ways that may turn out to be significant for capital formation.

Instead of assuming that clearly defined property rights are a necessary prerequisite for improving poor people’s access to credit institutions, it is more important to first explore how informal credit and local taxation practices in rural Senegal have influenced perceptions of property, mortgage, and public service provision. This places mortgage debt and property in a broader framework that connects both the social practices and long-term conditionalities of debt as well as the role of the state.

Read more in Kristine Juul’s chapter “Tales of Mortgage, Risk and Taxation in Rural Senegal,” in Land and the Mortgage: History, Culture, Belonging.


Diaw, Alioune. 1995. “Commercialisation des petits ruminants au Sénégal, le cas de l’axe Nord-Dakar” [Marketing of small stock in Senegal, the case of the North-Dakar axis]. Thèse. Dakar: Ecole Inter-Etats de Sciences et Medicines Vétérinaires (EISMV).

Guérin, Isabelle, Solène Morvant-Roux, and Magdalena Villareal. 2014. “Introduction.” In Microfinance, Debt and Over-Indebtedness; Juggling with Money, ed. Isabelle Guérin, Solène Morvant-Roux, and Magdalena Villareal, 1–24. London: Routledge.

Juul, Kristine. 2006. “Decentralization, Land Taxation and Citizenship in Senegal.” Development and Change 37(4): 821–46.

Peluso, Nancy, and Peter Vandergeest. 2001. “Genealogies of the Political Forest and Customary Rights in Indonesia, Malaysia, and Thailand.” The Journal of Asian Studies 60(3): 761–812.