The Minister of Justice Johnston Busingye has said that the government had to take a difficult decision to suspend bank property auctions after many complaints that alleged that the process was riddled with fraud.
Busingye said this on Friday while addressing several bank CEOs at a meeting organised to share ideas on how debt recovery can be streamlined to serve both the debtor and debt collector.
He explained that decision, taken about three months ago, had to be made after that particular aspect of banking was perceived as tainted by fraud, threatening to confuse the market.
He said that together with the Rwanda Development Board (RDB), the Ministry of Justice has a policy responsible for executing court orders and improving the processes to benefit both parties.
"Over time, we noticed that it was an area that was not rising up to the occasion to serve what it was supposed to serve. We noticed that there were gaps but we felt that suspending the auction temporarily was better as we leverage on technology to fill those gaps,” he said.
He said that often auctions of property is a high tension, often distorted and politicised affair but the reforms are coming in to push for the highest level of transparency and objectivity.
"A clear procedure of property auction consists of elimination of barriers to competitive auctioning, excessive legal formalism, unnecessary judicial technical oversight and undue delays,” he said.
Busingye said that over the last two years, the government has implemented focused reforms aimed at improving the execution of enforcement orders especially on property.
He said that some of the reforms include the establishment of effective location and valuation of debtors’ assets, effective public awareness for transparency and the use of an electronic system in property auctions.
He pointed out that a solid legal framework for tracing assets and reducing a debtor’s opportunities to hide and transfer assets was necessary adding an efficient land and vehicles registry was already in place.
Electronic public auction
He said that to remedy the challenges, the government launched an electronic auctioning system in August last year to eliminate all human to human contact.
"The system was created to largely reduce the human element in the auctioning process which effectively tackles any corruption that may arise and undervaluation of auction properties,” he said,
However, the Law which was in force provided that auction is conducted electronically but also provided that bidding can continue at the place of location of the property.
He admitted that this manual segment greatly compromised the electronic system forcing a decision to make the process fully electronic.
How it will work
According to the Head of the Access to Justice Services in the Ministry of Justice, Martine Urujeni, a resident in Rwanda or abroad, who intends to bid for the property with reference price equal to or more than Rwf5 million pays refundable bid security of five per cent (5%) of the reference price of the property.
Article 5 of the Ministerial Order stipulates that interested bidders enter offer prices through the electronic system where they are kept confidentially.
Six hours before the auction hour, the prices are disclosed, again through the electronic system and also submitted by email to both the bailiff and each bidder.
Urujeni said that this fee will help weed out ‘mafia rings’ formed by some brokers to distort prices and value.
"This fee is deposited onto the bank account specified by the Ministry of Justice and is refunded if the bidder is not awarded the property in question within three working days,” she explained.
Urujeni added that should the successful bidder pay the price within the time limits specified by law, he or she deducts the bid security from the price to be paid.
In August 2018, Rwanda Investigation Bureau (RIB) paraded individuals accused of being members of a network of dishonest auctioneers and business people involved in fraudulent auctioning practices.
The two suspects were accused of having received payments so they could pretend to be bidders at a public auction in Kigali City’s Kicukiro area where a petrol station valued at Rwf850 million was bought at Rwf330 million.