New bill seeks to make cooperatives more profitable

A new draft law is proposing measures to advance cooperative movement in Rwanda, through addressing issues of ineffective governance, mismanagement and lack of professionalism facing cooperatives, officials have said. The draft law Governing Cooperative Organizations in Rwanda was tabled before parliament on Wednesday, February 05, 2020. While explaining the relevance of the bill, Soraya Hakuziyaremye, the Minister for Trade and Industry said that since 2006 when the Cooperative Policy was approved, a lot has changed which calls for the need to move with times to respond to the current challenges. Since 2006, she said, cooperative organisations have increased tremendously in number from 919 by the end of 2005 to 10,025 as of December 2019. The minister stated that the number of their members also increased significantly from slightly over 100,000 in the same period to more than 5.2 million as of December 2019, noting that of these, 48 per cent are women. “This increase has brought with it many benefits but has also been beset by various challenges, particularly in governance, management and lack of professionalism,” she observed saying that the issues are grouped under three categories namely institutional, policy-related and those pertaining to the management of cooperatives. Tackling existing issues For all these reasons, Minister Hakuziyaremye said, the National Cooperative Policy was revised and approved in August 2018, pointing out that one of the key recommendations of the new policy was to revise the current cooperative law in identified critical areas. The current law was promulgated in 2007 following the passing of the policy on cooperatives. Explaining about issues pertaining to the management of cooperatives, the Minister said that the management of cooperatives is currently plagued by non-transparent decision-making processes. This problem, she said, has led to centralisation of decision-making by leaders which in turn results into conflicts. The bill will also seek to address the unregulated remuneration of members of the executive committee which currently encourages embezzlement, according to officials. It will also provide guidance on the contributions and distribution of dividends. Dividends, bonuses to members In order to make sure cooperative members fully own their cooperatives and prevent cooperatives and members to become dormant, this draft law provides how incentives and benefits will be increased and distributed to members. “So far, the cooperative policy does not have guidelines on how profits are distributed to members in form of dividends,” she said. The bill provides that a cooperative organisation assigns dividends on share capital to its members. The distribution of dividends to members is determined by the individual member’s share on the total share capital. Also, it stipulates that a cooperative organisation may pay out a part of its net surplus as bonus to its members. The value of bonus for each member depends on his or her collaboration with the cooperative organisation. In addition, this bill intends to introduce clear mapping and categorisation of cooperatives can facilitate the Government and other development partners interested in supporting cooperatives know better what types of support needed for each category of cooperatives. Another issue addressed by the draft law is the responsibilities of decentralized entities in the development of cooperative organizations. They also have the role of promoting cooperatives. The Parliament approved the relevance of the draft law, but MPs urged vigilance to make sure that cooperative members get the most of the move. MP Aimée Sandrine Uwambaje wanted to know how the new law could help protect Ibimina the informal credit and savings groups that have been critical in promoting the culture of saving in communities. “Across the country, there are people who are saving and getting [small] credit through these groups. Apart from trust among themselves, when one refuses to pay back, it is difficult for the money to be recovered to benefit the affected members. What strategies does the Ministry have to ensure that such people have security for their money?” she asked. Minister Soraya replied they were going to work with local government entities to continue sensitising members of these groups to form cooperatives through which they can easily get protection by the law. We have realised that the main issue is lack of trust in cooperatives because of the existing issues.”

News

New bill seeks to make cooperatives more profitable