Last week, Tuesday to be exact, this esteemed newspaper published a story highlighting the arrest of seven members of ‘Banque Lambert”. ‘Banque Lambert’ is what born ‘Kigalians’ call money lenders. For a while now, the Central Bank and the National Police have been coming down hard on these loan sharks, but I ask, “what have they fundamentally done wrong”?
The authorities say that these ‘Lamberts’ force people to accept huge interest rates but I think it’s simply the free market at its best, supply and demand. Rudimentary economics teaches us that the larger the demand, the larger the supply.
So, in this equation what is the demand and who are the suppliers? The ‘demand’ is for credit facilities, and the ‘suppliers’ are simply people that are willing to give them the credit facilities they need. Commercial banks should be able to do that, but do they? The answer is yes and no.
Sure the commercial banks might give you a loan, but it will be time consuming and bureaucratic. And that is if they deem you worthy of one. Because if you don’t have property that isn’t already mortgaged to the hilt, and you aren’t a big shot in some government department, the chances are that they will deny you the loan.
Well, guess what? A large majority of Rwandans are neither senior civil servants nor propertied. So, where does that leave them? Either desperate or resigned. The resigned ones either didn’t need the money that much or they can simply continue living hand to mouth, day to day, as they have always done. The desperate ones simply can’t shrug their shoulders and move on.
They have school fees to pay, fertilizer to buy, cattle to vaccinate, medical bills to worry about and wedding budgets to finance. So, they go to friends and family and try to raise a few francs and fail. What is their last option? Banque Lambert.
Certainly, interest rates of up to 35% are criminal, pun intended, but how different are they from the 20% interest rates that most commercial banks here charge? And without the hassle no less? The fact of the matter is that these people that we are arresting are simply providing a service.
Someone needs a loan, they give it to them, and when it’s time for repayment they get back their money and a bit of interest. You might argue that the interest rate is too high, but it is not as if the money lenders force their services down anyone’s throat. They are the ones that are sought after. Not the other way around.
I find it uncomfortable that the Central Bank and the National Police are involving themselves in contractual matters. What is the difference between a friend of mine giving me a loan, with a few francs extra thrown in for the service, and the Banque Lamberts ?
The facts are more or less the same. I needed money. I was given money. I was asked to throw in a few thousand francs extra. And I did so. The entire transaction is a simple contract. And contracts are usually governed by the clauses in them.
So, I have to ask myself, why are the Police arresting the money lenders? In fact, they should be arresting the people that are refusing to repay their loans. If they aren’t able to pay the money back, they must follow the law and allow to be declared bankrupt.
You know, I’ve read the Merchant of Venice by William Shakespeare and, truth be told, I feel for Shylock, the Jewish money lender. He didn’t force Antonio to borrow money, and Antonio didn’t have to accept the ‘pound of flesh’ clause of that contract.
But at the end of the day, his beloved daughter turned on him, he was ridiculed by the entire city and he was not even repaid. The unfairness of it all is monumental. I’m sure that the Central Bank has better things to do, such as make sure my paycheck is worth more than just a few sweet potatoes in the market.
And with all the criminals running around our streets, stealing car radios (which happened to yours truly), arresting money lenders is a waste of resources.