{Recently, Police received a case of a man, who alleged that he was receiving threats from his once colleague over the unpaid Rwf7 million, which he was supposed to pay back in just two months with an interest of Rwf4.2 million.}
The borrower had presented his house worth about Rwf150 million as collateral. It all started when the borrower approached the loan shark as means to meet his immediate financial needs through an informal arrangement, but the end result, after failure to meet the payment deadline, was blackmail, threats to harm him and to take over his house.
This is one of the many cases police receives on a daily basis.
According to police, each police station serving dense business centres or towns across the country, receive at least one complaint related to loan sharks, with the cases said to be persistently reported.
Loan sharks best known locally as bank lambert, is an informal person-to-person or person-to-entity arrangement to lend money to the borrower, payable in a very short time, in most cases with extremely high interest rate, contrary to the legal lending rate set by the central bank.
In most cases, the lender takes a house, car, land title, passport, guaranty bank cheques or driving licenses as security.
According to Supt. Jean Claude Karasira, the director of Anti-corruption and public embezzlement directorate in Rwanda National Police, this kind of arrangement is “illegal and punishable by the law.”
The law governing banking in Rwanda and the law establishing the organization of microfinance activities, states that only financial institutions – banks, microfinance and saving and credit cooperatives – are allowed to give loans.
“Dealers in these loan sharks should know that they are dealing in an illegal business and have no legal right to recover the debt. Refusing to reimburse an unlicensed lender isn’t a criminal offence and not a civil liability,” Supt. Karasira said.
“This deal is similar to someone, who sells 50kgs of cocaine to another person and then goes to court later to claim for reimbursement… it can’t work. The general principle of law is that ‘no one is entitled to his own turpitude’ or ‘no one can be heard to invoke his own turpitude,’” he added.
He noted that loan shark is a criminal offence punishable under article 324 of the Rwandan penal code.
It states that “any person, who abuses another person due of his or her weaknesses, passions, needs or ignorance to obtain, for his or her own interest or that of a third party, an interest or any advantage exceeding the normal interest in a contract or any contract giving him or her immovable or movable property, shall be liable to a term of imprisonment of six months to two years and a fine of Rwf200, 000 to Rwf1 million or one of these penalties.”
Supt. Karasira said: “Loan sharks are illegal lenders who often target low income and desperate families. They may seem friendly at first but borrowing from them is never a good idea as it destroys the good relationship, creates harassment and violent threats especially when you are behind payment period and the interest keeps on accumulating, and some borrowers flee the country.”
“Any lender licensed or unlicensed, who harasses the borrower is breaking the law. In fact, unlicenced lender bears no legal right to make forceful recovery of the loan at all because the loan itself is illegal.”
He noted that loan sharks also lead to uncontrolled money and tax evasion, and appealed to the public to desist from this kind of illegal financial business and report anyone involved.
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