For close to six months, he lived in fear because he had borrowed money from a loan shark. As the threats mounted and the interest rate soared, Michael lost his job. His desperation took a deadly turn and he even contemplated taking his own life. 

"I was laid off from my job just after borrowing the money. I needed rent, among other things. But the loan shark had no mercy to understand my situation. All he wanted was his money back,” says Michael.

Micheal thought of suicide but after a visit from a concerned relative, things took a lighter turn for him. "My cousin lent me enough to pay back the loan shark. I’m still paying my cousin back as we speak,” he adds.

Like Michael, many people find themselves in a spot of bother that requires money urgently.

The thought of "quick money” pushed him to loan sharks who charged him abnormal interest on top of security that was 10 times the value of the money he got.

Popularly known as ‘Bank Lambert,’ loan sharks have messed up the lives of many people desperately in need of money.

When 29-year-old Frank, approached a loan shark in town near the KCB and Bank of Kigali headquarters to borrow Rwf 600,000, he was asked to surrender his iphone, flat screen TV and home theatre as security to get the loan. He was also charged 50% interest.

"I was asked to surrender all that plus a post dated cheque of Rwf900,000 to mature in 45 days,” he says and adds that if he broke the terms of the agreement and didn’t meet the deadline, all his things would be taken by the loan shark.

Frank’s grandmother had to go to Uganda for an operation; he didn’t have a lot of time and already had a loan with his bank as well. He knew he would pull it off as he earned Rwf 650,000.

"I am not the best when it comes to saving money for long. I saved some but before I knew it, 40 days were up and I only had Rwf150, 000. To cut the long story short, I lost all my possessions and even the Rwf 150, 000 I had saved,” he says.

It was a bitter ending for Frank and he swore never to use loan sharks again.

These are just some of the testimonies of the many who have had a bitter experience with loan sharks.

Why go to loan sharks?

Remy Kagabo, a businessman, deals in furniture and home designs. He says loan sharks come in handy in times of emergencies but one must be smart enough to deal with them without losing at any cost.

"You must borrow money that is much less than what you earn. These loan sharks ask for crazy interest, are much quicker and no paperwork is needed,” Kagabo says.

The businessman says he doesn’t encourage anyone to borrow from loan sharks but they are sometimes seen as "saviours” around town.

"Sometimes people don’t have much left of a salary and the bank can do very little for them, so in times of need, their only way out is the sharks who don’t need credit history,” Kagabo says.

How are these interest rates set?

Manzi (not real name) is a loan shark. The first impression you get when you meet him is of the boss of some corporate company. When I met him, he was clad in khaki trousers, a tartan shirt and moccasins.

According to Manzi, on average, people borrow between Rwf500, 000 to Rwf 20,000,000. It’s known that banks adjust their lending rates with respect to the Central Bank’s benchmark rate and the interest range for banks is between 18-21%.

So what about loan sharks?

Thomas (not real name) is also a loan shark and has a shop that sells computers and other gadgets in the city centre. But rumours around his shop say that he earns more from money lending and that the computer shop is just a disguise to help him carry on with his illegal business.

Thomas operates illegally since he is not a licensed micro-finance lender, nor is he affiliated to one. He says his interest rates depend on the number of times the client has made transactions with him and the status of the economy. First time clients pay a lot compared to someone coming back for the second or third time.

"We try to bring these things up when talking to a client but to be sincere; there isn’t a formula that is used. A client calls with an urgent need and from how desperate they are, we set the interest rate and hold onto their belongings for security,” he says.

Thomas adds that this business isn’t about keeping loyal customers. The more customers you have, the higher the interest rates go.They feed on the ignorance of new clients.

The consequences

Mariam Mbabazi’s husband sought the services of a loan shark and lost a lot of property.

"He borrowed Rwf5million to start a restaurant but no one else knew about it. I asked him where he had gotten the money and he said it was from his brother.Two months later, he came home distressed,” she says.

Mbabazi adds: "When a group of men came home and swept our house clean, I realised what was going on.”

However, according to frank, much as the deadlines are tight and interest rates are high, some people do pull through. And that also, becomes a problem of its own.

"The moment you succeed with the loan shark’s demands, it becomes an addiction. Even when your business grows, you always opt for loan sharks as opposed to formal systems like banks,” Frank says.

What alternatives are there?

It’s advisable to borrow what you can easily pay back, says Vanessa Mutamba, Bank of Kigali’s Public Relations and Corporate Communications Officer.

"Before borrowing, figure out what loan you need. Is it long term or short term and if its short term, then it’s advisable to get an overdraft which is got the same day or the following day and interest is levied on the amount used,” she notes and continues to say, "In case one needs money that is more than an overdraft can cover, the bank also offers credit cards that have a limit of a monthly net pay and if one pays 100 per cent within a month, there is no interest rate charged,” Mutamba advises.

This makes more sense and is more secure than paying loan sharks up to 50 per cent interest with threats along the way.

What do the authorities say?

Much as this trade has left many psychologically abused and others striped of essential belongings, authorities can’t go after loan sharks unless people help them.

Most loans sharks do not have a copy of the loan agreement, if there even is one. With no paper trail, there is very little evidence that a transaction was made. They leave no trail in their discreet business.

National police spokesperson, Chief Superintendent of Police, Celestin Twahirwa, says that this problem is being addressed through awareness campaigns and sensitisation.

"Some people didn’t even know that it is illegal to conduct such trade but with our awareness campaigns, people are dropping the vice. Of course it still happens but we have put teams in place to grab the culprits,” he says and adds that both the loan shark and the borrower stand to be penalized if caught.

patrick.buchana@newtimes.co.rw

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What are the alternatives?

Anitha Nyirabavugamenshi

There are several women cooperatives I’m familiar with which can lend you money in case you urgently need it, most especially if you’re a member. That has always been my first option to get quick cash for years now.

Jean Bosco Ntawuyirushintege

The only option I have whenever I need quick cash is to sell some of my property. I make sure I have something that can be put on sale immediately and get me quick cash to solve my problem.

Tito Gakire

Personally, a promising option is to request for a salary advance from my employer in case I need quick cash. Salary advance is the only way you can be sure to get immediate cash without paying interests and other risky charges that come with borrowing.

Fassy Ingabire

I think borrowing from a friend is the only close and possible way to get quick cash. As they say, a friend is the brother/sister one never had; friends can save you from any problem when all other options fail.

Jean Marie Vianey Sibomana

I always consider borrowing from my cooperative whenever I need quick cash; this is mainly because they aim at helping their members who need urgent cash or have a certain problem.

Michael Tangishaka

I have heard of some individuals here in town who can lend you money whenever you need it urgently and then you pay back with a high interest. Well, even if the interest is high, it is still a quick option to get cash when you desperately need it.

Compiled by Dennis Agaba