New tenurial arrangements emerging  

Abdul Bayes       | Published: April 09, 2018 22:30:25

The predominant tenancy system had been the share-cropping system in Bangladesh for ages. In economic discourse, the system is generally criticised for its inherent exploitative and anti-incentive syndromes. This is because the owner of the land shares a half of the output without paying a penny for the input given by the tenant. However, with the spread of modern paddy and wheat cultivation, some changes in contractual arrangements were noticed in different parts of this country. For example, not only harvests - but also certain input costs are now being shared by the landowners in some areas. On the other hand, arrangements like fixed-rent tenancy, advance cash-rental payments and so on are increasingly stepping into the tenancy market as substitutes of the traditional share-cropping system.

Before we speak about the context and impacts of rural tenancy market, it would be pertinent to scan through the established theoretical perspectives on such markets. The debate dates back to a few hundred years. Adam Smith argued that the system of share-cropping is inherently 'exploitative' and injects no incentive to the tenants for investment in modern input. Smith took for granted that both the land-owner and the tenant would find no incentive to invest in land. Alfred Marshall, on the other hand, held a stronger view against share-cropping system. He argued that in addition to the negative impact on long-term investment from both the parties, the tenant would also lose the incentive to cultivate land intensively and efficiently. It is simply because his sweat under the sun would bring home only a half of the additional output. So, why work harder? That means, labour-input under share-cropping would be less than other tenancy arrangements - thus impinging negative impact on the total output. In such a "loss-loss" situation, incomes of both the land-owner and the tenant might go down.

Of course, one economist named Cheung came up with a compromise. He argued that if proper mechanisms could be developed to ensure that the tenant supplies optimal amount of labour, share-cropping could be as efficient as other arrangements. In fact, he suggested three such mechanisms where sharing of the input cost is one. But other economists opined that share-cropping is expected to surrender wider space to the fixed-rent system with the development of agriculture and in course of time and under a system of information symmetry, share-cropping might even cease to exist. We shall attempt to evaluate the situation empirically in the following paragraphs as to what extent this trend is true in the case of Bangladesh.

Prior to Bangladesh's independence, 91 per cent out of the rented-in land in East Pakistan was transacted under the share-cropping system. But with the advent of the MV paddy since the late 1970s, seasonal fixed-rent tenancy and, to some extent, annual and medium term (three to seven years) leasing arrangements began to claim some of the shares of the share-cropping system. For example, the 1996 Agricultural Census reported a substantial decline in the area under share-cropping from three-fourths in 1984 to two-thirds in 1996. Survey data used in this kind of research also recorded a decline by nearly one percentage point per year over time - from 72 per cent in the 1980s to 59 per cent in most recent years. Thus, it is quite conceivable that adopter-farmers have growingly become interested in fixed-rent system - thereby considering a relatively higher return from investments made on modern input under this system. This also showed that farmers in Bangladesh have become relatively more risk-takers, than risk-averse, by switching from share-cropping to fixed-rent system. But in rain-fed areas, where modern technology is yet to penetrate, share-cropping is as widespread as it was before.

We can draw upon some data with a view to gaining insights into the changes in the tenancy market over time. First, the proportion of land under own cultivation significantly declined from about 77 per cent in the 1980s to 53 per cent in more recent years. Second, the proportion of land under tenancy (rented land) increased from one-fourth of cultivated land to about a half during the same period. And third, land under the traditional exploitative scheme (and disincentive to farmers) has almost been  constant over time and it seems that it is ready to leave space for the newly emerging and relatively more lucrative alternative options, such as fixed-rent or mortgage system. The economic reasons behind the shift in preference is mainly the incentive to work harder, which is almost absent in share-cropping system. As a result, increased use of modern input in agriculture takes place leading to the enhancement of yield and production levels.

To infuse poignancy into the above-mentioned points, we shall now discuss the status of different sizes of farm households in the tenancy market. The purpose here is to know who are engaged in tenancy in rural Bangladesh. We observe that most of the tenants are small and marginal farmers who take lease of land for two main purposes. On the one hand, it is cost-effective for them to rent land and, thus increase the capacity-use of their farm establishments. On the other hand, they think that tenancy is socially more prestigious than working as day-labourers for other's land. By and large, about 57 per cent of the transacted lands are operated by households who own less than 0.2 hectare of land and 38 per cent are controlled by those who own 0.2 to 1 hectare.

Of course, the tenancy arrangement could also be cast in terms of land ownership groups. About a third of the rural households used to cultivate under share-cropping arrangements in the 1980s. The share of late has reached about 36 per cent to 28 per cent now. Side by side, the proportion of households under fixed-rent system increased from about 16 per cent to 24 per cent. Again, the share-cropping arrangement claimed about three-fourths of the tenancy lands in the base year. By 2014, for example, the share dropped to about half of the total tenancy. Thus, it appears that alternative tenancy arrangements have been evolving over time and interestingly, share-cropping seems to have been outpaced by the new arrangements.

Abdul Bayes is a former Professor of Economics at Jahangirnagar University.




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