The Ministry of Local Government (MINALOC) last week issued a circular instructing pursuit and punishment of all local leaders who defaulted on loans from Umurenge Savings and Credits Cooperatives (U-SACCOs) – the sector based microfinance institutions.
According to the circular distributed to all the 30 district mayors, the local leaders implicated were given up to the end of this week to pay up, to ensure they have cleared before the end of the year.
In an interview with The New Times, Prof. Jean Bosco Harelimana, the Director General of Rwanda Cooperative Agency said that Umurenge-SACCOs gave more than Rwf648 million in loans to local leaders.
Of such loans, he said, some Rwf220 million were duly repaid, which means that non-performing loans are equivalent to 65.9 percent of the total loans disbursed to local leaders were defaulted on by local leaders, far higher than the 5 percent acceptable default rate by central bank.
Overall, there are about 502 cases of local leaders with unpaid loans countrywide, according to information from RCA indicates.
Some of the cases, Harelimana said, date as far back as five years.
“They (local leaders) owe more than Rwf428 million outstanding loans to the SACCOs. Such money is very much considering the capital of these Microfinance institutions,” Harelimana said.
The circular signed by Prof. Anastase Shyaka, the Minster of Local Government, among others calls upon mayors to censure local leaders and staff who have involved in this “act of dishonesty” in case they fail to pay within the specified period.
To the mayors, Shyaka said: “Make sure debtors have paid off the outstanding loans by December 31, 2018; and impose severe administrative punishments against staff who will not have abided by the requirements before January 15, 2019.”
The New Timesunderstands that a taskforce composed of institutions like the local government ministry, Rwanda Investigation Bureau, the Ministry of Justice, the Ministry of Trade, the Ministry of Finance and the Rwanda Cooperative Agency (RCA), to ensure this issue is sorted in the shortest period.
The problem of local leaders not paying back the loans taken from the SACCOs came to the limelight at the 16th National Umushyikirano held in Kigali recently and one of the resolutions from the meeting was to streamlining the functioning of these SACCOs for better output.
Resolution two from the meeting reads: “Improve the overall functioning of Umurenge-SACCO for the better fulfilment of its mission and take adequate measures for quick recovery of loans from defaulters”.
“They (leaders) have means to service the loan because they even earn a salary. But, some have been indifferent (about servicing the loans…they thought that Umurenge SACCOs would never manage to recover the money,” Harelimana said.
There are 416 U-SACCOs countrywide, meaning that each of the country’s 416 sectors has one SACCO.
In total, they made Rwf1.9 billion in profits in the first half of 2018, slightly below Rwf2 billion profits achieved in the first half of 2017, according to statistics from the National Bank of Rwanda.