August 7, 2019

Development Bank of Rwanda Gives Billions In Loans To Cooperatives Without Knowledge of Members

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Development Bank of Rwanda (BRD) headquarters in Kigali

Five tea growing cooperatives are facing bankruptcy and collapse due to loans forced on them from the Development Bank of Rwanda (BRD), parliament has discovered.

Around 2010, government put up a financing facility to help tea farmers in different districts of southern and western regions to expand their production and thereby improve their livelihoods. The Finance and Economic Planning Ministry channeled the money through BRD.

Farmers had been bitterly complaining of low prices which were also being affected by the ‘zoning’ policy whereby farmers were not allowed to sell their tea beyond a specific region.

COTHEMUKI tea cooperative in Nyaruguru district now owes BRD Rwf 3,154,579,867, while COTHEGAB cooperative from Nyamagabe district owes Rwf 739,955,100, as COTHEGA cooperative in Nyamasheke has debt totalling Rwf 2,161, 588,429.

Parliamentary committee set up in April to probe why the agriculture sector was performing poorly despite massive government investment, on Monday August 5 submitted its report, and it paints a grim picture.

The full report is 736 pages covering various aspects of the agriculture sector.

First, the 9-member probe team found that BRD hurriedly signed off the loans to the cooperatives without the involvement of the members.

The leaders of these cooperatives were called to BRD to sign for the loans and the bank has no evidence whether the loans reached the ordinary members of those cooperatives.

The probe says in COTHEGAB cooperative, its head refused to sign for the loan, but the bank accepted another person to sign on behalf of the cooperative. The MPs wonder why the bank was so eager to release the money to whoever was available to sign.

The probe also found that BRD gave the loans without verifying the amount of land on which the tea was grown. For example, one farmer in COTHEMUKI cooperative was recorded by the bank as having 21 hectares yet he had 11 hectares of tea.

In another shocking case, the lawmakers found that the amount of the loan which COTHAGA cooperative signed for was more than the money that actually arrived on the cooperative’s bank account. The loan agreement reads Rwf 1,732,014,000, yet on the bank account only Rwf 447,629,027 was recorded.

The discrepancy of more than Rwf 1.3billion left the parliamentary probe wondering where this money went and who benefited.

“There are farmers in this cooperative whom BRD claims it owes yet they never received any loans,” said committee chair Ngabitsinze Jean Chrysostome in the Chamber of Deputies. “There is no list of beneficiaries of the loan to aid in determining who is supposed to repay the loan.”

Another strange occurrence is that around 2015, the bank, without warning informed the cooperatives that the interest on the loan had increased from 8.5% to 15%.

In his explanation to the probe committee, BRD CEO Eric Rutabana said the finance ministry did not release Rwf 1.5 billion meant to finance the loans given to the cooperatives, and so a decision was taken by the bank to transfer the burden on to the farmers by increasing the interest.

“The CEO of BRD responded that [finance ministry] did not give a reason for not disbursing phase 2 of the loan financing but BRD has continued to make reminders,” reads the large parliamentary report.

Following the presentation of the findings, parliament has given the Prime Minister Dr Edouard Ngirente a period of 6 months to relieve the tea farmers of the loan burden, and punish officials from BRD responsible for the handling the loan scheme.

Since 2009, BRD, a government bank, has been managed by 3 men including current CEO Rutabana. He replaced Alex Kanyankore in October 2017.

Kanyankore was fired and immediately arrested. This past June, he was sentenced to six years over corruption and receiving bribes from various companies involved in agriculture.

In a particular case, Kanyankore influenced the award of $8.1m (Rwf 7billion) loan to Top Services firm for importation of fertilizers. In return, he got kickbacks.

Kanyankore also recieved $12,500 worth of benefits from another company.

The Nyarugenge Intermediate Court in Kigali also slammed a fine of Rwf22.5m on Kanyankore in addition to the jail term.

Kanyankore became CEO in 2013 after replacing Jack Kayonga, who had also been at the helm of BRD since 2009.

Currently, Kayonga is CEO of Agaciro Development Fund, Rwanda’s national sovereign wealth fund. It announced in July that it had clocked $200m.

BRD as is known today was not the same before 2014. In that year, commercial portfolio of the bank was sold to Atlas Mara Group including assets such as the BRD Insurance brokerage firm.

Back to Parliament’s probe committee, it did not name any individuals from BRD bank, apart from recommending that the Prime Minister take up the case.

For the part of the cooperatives, asked why they accepted to take such huge loans well aware they wouldn’t be able to repay, one of current leaders said: “ni NAEB yadushyiragaho igitutu ngo babikore” (It is [National Agricultural Export Development Board] which pressurized us to accept).

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