The new legislation governing tontines – commonly known as ibimina – is expected to deter mismanagement of funds saved by members and help to ensure accountability for the growth of these community-based financial schemes, according to people who spoke to The New Times.

A ministerial order of August 21, 2024, governing tontines provides, among others, that the ministerial order stipulates that a tontine is registered with the administration of the sector in which it operates. Application for registration is done online or by submitting the required documents to the Sector administration, and it is free of charge.

The order seeks to implement a provision on tontines contained in the current law governing deposit-taking microfinance institutions.

It defines a tontine as scheme through which a group of individuals contribute sums of money to make collective savings and lend money to one another on terms agreed upon among themselves.

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According to Jean Paul Ibambe, a lawyer, he promulgation of this Ministerial Order regulating Ibimina is a positive development, particularly in terms of ensuring the security of the funds contributed by members of tontines.

"Prior to this order, there were numerous issues, most notably the lack of a legal framework and the absence of legal personality for tontines,” he said, adding that tontines can now obtain legal personality through registration, which grants them the right to, for example, sue in court in cases of default.

The new regulation allows members of tontines the freedom to set and adopt their own rules of procedure. This, together with the decentralisation of the registration process, Ibambe said makes it a convenient and accessible approach for members.

The lawyer highlighted that there were previously cases of fraud that arose and those who committed these cases would go away with it because there were no clear rules that were governing tontines.

"Personally, I was a member of a tontine where our leader took some money, and we were unable to sue him because we lacked the legal personality required to take the case to court. I’m certain many people have faced similar challenges, which is something this order on ibimina will help resolve,” he noted.

Under the new order, a sector administration has responsibilities to provide facilitation, advice or guidance to a tontine operating in its jurisdiction on request or when considered necessary, and to mobilise registered tontines under its jurisdiction to comply with their respective rules of procedure.

It also provides that the ministry in charge of finance is responsible for promoting and regulating the functioning of tontines through its department of financial sector development.

Stimulating interest in Ibimina

Scholastique Mukamusana, a trader in Kimironko Market in the City of Kigali, said that ibimina provides flexibility for members to contribute based on their financial means and grow their savings over time, which promotes the savings culture and helps them respond to their developmental and welfare needs.

Mukamusana, who is a member of a tontine, observed that the new regulation implies security for Ibimina members in terms of the management of their money by providing for related monitoring as well as accountability.

Currently, she said, the management of a tontine is based on trust among members, but expressed concern that when one misappropriates a significant amount of funds, members lose in the process.

"That issue occurs because ibimina are not protected from fraud, misappropriation and other unfair practices,” she said, pointing out that registering a tontine in a sector for it to be legally recognised "is a good and reliable way such that a person cannot fear to contribute a significant amount of money because they are sure that the money is kept in a secure manner” for a member to get it when they want it.

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Others say the regulation of tontines was long overdue.

"Ibimina are important as they contribute to the progress of Rwandans, but they lacked of a legal protection,” said Anastase Munyaneza, a farmer from Kayonza District, Eastern Province, who is also a member of a tontine.

He indicated that a person who needs money to pay school fees for their child or get a patient treated, can easily get it from a tontine as opposed to resorting to a bank which usually involves lengthy processes.

According to Munyaneza, previously if a member does not pay back the loan they received from a tontine, recovering it was not guaranteed since there was no law to deal with such a case as tontines had no legal personality.

He said that the intervention of local administrative entities or authorities was hindered by a lack of enforcement orders provided by the legislation as, for instance, they cannot auction the property of the implicated person without a court order.

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Theogene Munyangeyo, Chairperson of the Committee on Economy and Trade at the Chamber of Deputies, told this publication that the move is expected to help ensure transparency in tontine management, thereby enabling their growth and contributing to addressing very costly informal lending to residents.

Because formal financial institutions such as banks generally lend money at costly terms and sometimes with "a lack of a sense of urgency,” Munyangeyo observed that people resorted to banque lambert.

Banque lambert refers to a system of unlicenced lenders who charge exorbitant interest rates.

The MP indicated that tontines are in line with the savings culture of the communities in which they operate, and that people have trust in them because of the potential they have to mobilise funds for meeting peoples’ needs.

This, he said, was a natural need that informed their regulation.

"Effective of regulation and support of tontines will benefit their members in terms of secure savings and access to loans, which could be an eye-opener for financial institutions to improve their services to citizens,” Munyangeyo remarked.

Munyangeyo is convinced that if tontines become competitive, banks and microfinance institutions could face increased competition and perhaps change their operations to benefit more people.