behave selfishly under the new institutional economics is even greater than is assumed in the neoclassical economic model. In the former, they do not behave neutrally to each other; they are assumed to go to the extent of giving distorted or incomplete information and of cheating in order to gain greater benefits from the contract than the other contracting parties (Williamson, 1985).

The opportunistic behavior of economic agents combined with asymmetries in information increase transaction costs in such industries as banking and insurance as the lenders/insurers spend more resources in their attempt to control the opportunistic behaviors (incentive problems) of borrowers and agents through such measures as screening, rationing, monitoring and enforcement procedures. The opportunistic behavior may be expressed in the form of 'moral hazard' or 'adverse selection'. In the insurance industry, moral hazard arises when an agent who takes up an insurance policy has an incentive to take less care to avoid losses which give rise to claims, as he would, in any case, be assured of compensation in the event of losses taking place. On the other hand, adverse selection occurs when the insurance company cannot differentiate between low risk and high risk agents (agents who have differing probabilities of claims), and hence must offer all of them the same insurance contract, with the result that the insurance contract only appeals to (adversely selects) high risk agents (Rothschild and Stiglitz, 1976).

In banking, moral hazard arises when a borrower sets out to obtain a loan but with no intention to repay it back even when he has got the resources to do so. On the other hand, adverse selection occurs when the lender cannot distinguish good credit risk from high risk (less credit worthy) borrowers, and hence must offer them similar interest rate and other loan terms, with the result that the loan contract only appeals to (and adversely selects) the high risk borrowers (Jaffee and Russell, 1976).

As information asymmetries, moral hazard and adverse selection have given rise to, among other things, the banking practice of collateral requirements, land registration has had to play an important role in facilitating credit markets as it enables land to become a highly desirable collateral asset. The score card on this indicates a benefit for the landowners as well as for the financial sector: the landowners gain access to cheaper and more medium and long term credit while the financial sector gains an expanded market of potential borrowers. Similarly, land registration plays a more generic role of reducing information asymmetries as it enables both parties to a land transaction to gain access to the same information, in fact often with the buyer receiving state guarantees about the authenticity of the registered information on land. Not only does this reduce land transaction costs but it also speeds up the process of land acquisition for investors and removes landownership uncertainty thereby providing a considerable investment incentive. The speedy and smooth land transactions help also to increase the transferability of land from less efficient to more efficient users, thereby enhancing the overall allocation of land resources.

The role of land registration in reducing information and transaction costs is a cornerstone of the conceptual frameworks linking land registration to farm productivity, financial development and economic growth, the subject of Sections III and IV.

**III.** A **Conceptual Framework of Land Ownership Security and Farm Productivity**

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