The law N° 024/2021 of 27/04/2021 governing cooperatives in Rwanda, which was published in the Official Gazette on 14/05/2021, has brought about new changes that are expected to improve the performance of cooperatives and incomes of their members.

It replaces the previous one which was promulgated in 2007 following the passing of the policy on cooperatives.

The new law will address issues that the management of cooperatives have been grappling with including non-transparent decision-making processes which led to centralisation of decision-making by leaders which in turn result in conflicts.

Members of Twisungane cooperative work in a potatoe plantation in Muko Sector, Musanze District. Photo: Sam Ngendahimana.

Also, the law seeks to address the unregulated remuneration of members of the cooperative executive committee which currently encourages embezzlement, according to officials.

It also provides guidance on the contributions and distribution of dividends to members.

Speaking to The New Times, Prof. Jean-Bosco Harelimana, Director General of the Rwanda Cooperative Agency (RCA) said "the aim of these changes is to build strong cooperatives, which are professionally managed, create jobs, and improve the socio-economic development of the members."

Here are some of the new changes introduced by the law.

Reducing the time for granting certificate of legal personality

The new law has reduced the time it takes to grant the certificate of legal personality to a cooperative from the current 35 days to two days thanks to the use of technology. This is in the spirit of easing the doing business.

The National Agency either issues the certificate of legal personality or, where applicable, informs the cooperative of the grounds for refusing to grant the certificate, within two working days of receipt of the District report indicating that the cooperative implemented its action plan.

The report must be prepared thirty (30) days before the expiration of the provisional registration.

Suspension of leaders and employees due to mismanagement of the property of a cooperative

Basing on the audit report made in conformity with the provisions of this Law or faults committed, the National Agency (RCA) provisionally suspends leaders and employees of a cooperative due to mismanagement of the property of the cooperative.

In that case, the National Agency convenes immediately the General Assembly to take a decision and appropriate measures.

In case all members of organs of a cooperative are suspended in the general interest of the members, the National Agency immediately appoints a member of the cooperative or its employee to follow up and manage the interests and assets of the cooperative if the replacements of the suspended persons are not yet appointed.

The National Agency also blacklists all leaders and employees convicted of mismanagement of the cooperative assets who are also not eligible to serve in any cooperative as leaders or managers.

Dividends, bonuses to members

In order to make sure cooperative members fully own their cooperatives and prevent cooperatives and members to become dormant, this draft law provides how incentives and benefits will be increased and distributed to members.

So far, the cooperative policy does not have guidelines on how profits are distributed to members in the form of dividends.

The bill provides that a cooperative organisation assigns dividends on share capital to its members. The distribution of dividends to members is determined by the individual member’s share on the total share capital.

Distribution of net profit

In case a cooperative makes profit, the net surplus is distributed, with at least 50 per cent of it being assigned as dividend to its members, but one half of this is paid out to members and the other half is retained in the cooperative to increase the share of a member in the capital.

Also, not more than 10 per cent of the net surplus is deposited into the education and training fund; while the compulsory savings of members gets ten per cent 10 per cent of the net surplus.

The remaining net surplus equivalent to 30 per cent is used for various purposes including deposits into the general reserves of the cooperative; bonuses paid out to members in proportion to the activities carried out by every member with the cooperative; and incentive bonuses to the Board of Directors, Supervisory Committee and employees.

This, Harelimana said, was intended to enable a cooperative member to get a direct profit and indirect profit based on investment, access to training, among others.

Permanent education and training fund

A cooperative must establish a permanent education and training fund. A cooperative is not permitted to allocate dividends to its members from the education and training fund except in case of dissolution of the cooperative.

"This education and training fund is intended to help cooperative members get skills to be able to operate professionally, fast-track the achievement of their goals, and understand the cooperative  movement because it is a reliable means to drive the change planned for by the NST1 (the National Strategy for transformation),” Harelimana said.

Investing and placement of funds of a cooperative

A cooperative may invest and place funds in any activity deemed profitable upon approval by the General Assembly, the law stipulates.

Before funds are invested, the Board of Directors considers the revenues of the cooperative as well as the security aspects of the investment.

Talking about this new provision, Harelimana said that cooperatives can, using their savings, make investments in their own projects, or invest in other cooperatives or companies.

Penalties

Harelimana said it was realised that there are some cooperative leaders who have been exploiting cooperatives in their own interests.

"This law provides punishments against such people, something which was not provided for in the previous law,” he said.

For instance, one member or all members of the Board of Directors, an employee or a member of a cooperative who fraudulently uses the property of a cooperative in his or her personal interests or for objectives other than those it was designed for; sells or damages fraudulently the property of a cooperative; commits an offence

Upon conviction, he or she is liable to a term of imprisonment of not less than two years but not exceeding five years and a fine of not less than Rwf500,000 but not exceeding five million Rwandan Rwf5 million.

Also, a member of a cooperative who pledges his or her share as security commits an offence, the law stipulates.

Upon conviction, he or she is liable to a term of imprisonment of not less than six months but not exceeding two years and a fine equivalent to two up to three times the value of pledged share.

It is to note that there are more than 10,000 cooperatives in Rwanda with more than 5.2 million members, and more than 45 billion share capital, according to information from RCA.