Financing Urban Infrastructure through Land Leasing: Evidence from Bahir Dar City, Ethiopia

TL;DR

This study examines how land leasing contributes to financing urban infrastructure in Bahir Dar, Ethiopia, highlighting its significance and identifying inefficiencies in revenue collection that hinder infrastructure development.

Contribution

It provides empirical evidence on land lease revenue's role in urban infrastructure financing and identifies key inefficiencies affecting revenue collection in a developing city.

Findings

Land lease revenue is a major source of urban infrastructure funding.

Significant inefficiencies exist in land lease revenue collection.

Improving land management could enhance infrastructure investment.

Abstract

The provision of essential urban infrastructure and services for the expanding population is a persistent financial challenge for many of the rapidly expanding cities in developing nations like Ethiopia. The land lease system has received little academic attention as a means of financing urban infrastructure in developing countries. Therefore, the main objective of this study is to assess the contribution of land leasing in financing urban infrastructure and services using evidence from Bahir Dar city, Ethiopia. Primary and secondary data-gathering techniques have been used. Descriptive statistics and qualitative analysis have been adopted. The results show land lease revenue is a dominant source of extra-budgetary revenue for Bahir Dar city. As evidenced by Bahir Dar city, a significant portion of urban infrastructure expenditure is financed by revenues from land leasing. However, despite the critical importance of land lease revenue to investments in urban infrastructure, there is inefficiency in the collection of potential lease revenue due to weak information exchange, inadequate land provision for various uses, lack of transparency in tender committees, and the existence of poor documentation. Our findings suggest that Bahir Dar City needs to manage lease revenue more effectively to increase investment in urban infrastructure while giving due consideration to availing more land for leasing. Keywords: urban, land, revenue, inefficiency, lease, financing, Bahir Dar City