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Congo-Brazza - Moneylenders are ruining the banks
SOCIAL CONDITIONS
State employees and
foreign shopkeepers who have to go to moneylenders
to supplement their family income or their businesses, know what it can cost them
to be dishonest or insolvent when it comes to paying back their loans.
The following is what happens when a country’s financial situation is rather shaky
«Let’s look at a typical situation! If you’re a shopkeeper who has borrowed money from these “gentlemen” and if you’re late paying back the interest, “they” come with their mob and remove the goods from your shop — money, everything...I’ve been in almost every police station in Brazzaville to complain, with no result. Instead, the police accuse me. I’ve met many fellow citizens who are in the same boat. It’s because we’re foreigners that we have to put up with this,» complains Mohammed, a Senegalese shopkeeper, who set up in Brazzaville in 1985. In order to rebuild his business, after his shop was looted during the events of November-December 1998, he had to seek help from a moneylender, who loaned him 10 million CFA francs. But what problems this caused him!
Moneylenders are part of the new type of business people emerging in Congo-Brazza. They work through well-established but secretive networks, with the help of corrupt bank staff, public revenue department officials, police officers. And because of their sizeable bank accounts, they’ve succeeded in taking over most of the loans business. Their system is simple: A loan of 5,000 CFA francs gives a return of 2,500 CFA francs in interest, that is, 50% of the outlay no matter what the total. There are plenty of «clients», normally government employees suffering from irregular salary and pension payments, and large-scale expatriate business owners.
Some of the moneylenders are former officials who’ve left their positions, and turned to this very profitable occupation. Others are students, who’ve gone into «business» by saving their study-grants. There are ever-increasing disputes between them and the insolvent civil servants who form their permanent and submissive customer-base.
Some insolvent civil servants pay a heavy price. Payment of their salary has become a real nightmare. Because of the size of their debts, they move their salary from bank to bank, to prevent their creditors catching up with them. But the creditors have their own tactics, going through payment agents or corrupt bank directors, to have the salaries of their «clients» paid straight into their own bank accounts. One of these clients, on pay-day, began to weep in public, since five months had gone by with no income whatsoever.
In general, contracts state that when both parties have bank accounts, repayment of the debt can be made by direct transfer. Sometimes, the creditor takes the customer’s salary and gives him or her the balance when the interest payments have been deducted. Clients who have no bank account, sign a proxy-form and a note of hand. To avoid any dispute, a notary or lawyer authenticates the contract.
But regular disputes take place, and officials and usurers choose out-of-court settlements, which often end with disputes. A moneylender explains: «Our clients are mostly people who know us well. They are government employees, or large shopkeepers from Mali, Senegal and the Lebanon. As regards employees, if we are hesitant to hand over the most dishonest to justice, it’s because we want to avoid getting them into a mess. Imagine someone who is only earning 120,000 CFA francs who takes on a debt of 2 or 3 million. Unable to pay it back, he moves his salary from one bank to another, so he can’t be caught, although the contract states that about 50,000 CFA francs must be taken from his salary at the end of every month, until the debt is repaid. You just try and get hold of this salary when the guy’s got a thousand and one claimants all wanting their share!»
The financial scandal
State employees retort that it’s the creditors who are abusing their trust. Their greed crucifies the debtor, taking his income for months or even years.
Despite both sides refusing to accept blame, the reality is clear: On the one hand you’ve got a greedy creditor; on the other, a dishonest, insolvent customer. That’s the situation. Often, moneylenders resort to using police accomplices and, with this protection, deliberately overstep the contracts they have with their clients. They pay commission to agents to have salaries transferred to their own accounts.
These practices are widespread, and they’re part of what’s undermining the development of the banking sector in Congo-Brazza. In December 1998, Radio Congo warned the public about twelve employees in the public revenue office, who were mixed up in the loss of salaries of 600 state employees. At the same time, many payment slips have disappeared from the banks. One civil servant puts it this way: «Those responsible for these scandals go unpunished. There’s no money to pay pensions, salaries, and student-grants regularly, but there always seems to be enough cash available for the crooks to use.
The moneylenders are rich people and their savings are estimated to be about 45% of the total savings in the banks. That’s one reason why the Banque Commerciale Congolaise (BCC) and the Banque Nationale du Développement du Congo (BNDC) went bust in 1994. The same applies to the Caisse Nationale d’Epargne, which has also failed. The Congolese Banking Union (UCB), which is still operating, is suffering from the same problem. At the moment, it can’t afford to give credits to its clients. «And all the while, our money is filling the moneylenders’ coffers» protests one saver. Other financial institutions, such as the Banque des Etats de l’Afrique Centrale (BEAC), the Mutuelle Congolaise d’Epargne (MUCODEC), the Crédit Rural, the Banque Internationale du Congo (BIDC), have similar problems. Junior employees are frequently involved in the «action». «Greasing our palms so we make money available is a godsend for us. We know what we’re doing is not right, but there’s really nothing we can do to change the situation, since our salaries are small and paid very irregularly,» says one employee, not too obligingly. In 1995, the former regime instigated a background-study on the privatisation of bankrupt savings institutions. These included the BCC, the BNDC and the Caisse Nationale d’Epargne. The 1997 civil war prevented any immediate follow-up. Up to now, the position of the new government on this issue is unknown, although, according to official sources, the government is thinking about going ahead with the privatisation of these institutions.
Congo is only the prototype
Congo-Brazza’s situation regarding the moneylender’s stranglehold on the economy is typical of what’s happening in most poor countries. Moneylending is condemned in Mauritius, Congo RDC, Burkina-Faso, the Central African Republic, and in Cameroon, among others, although the scale has not yet reached the levels of Congo-Brazza’s situation.
So, how can Congo-Brazza’s situation be remedied?
Professor Michel Gotto from Cameroon, specialising in economics, stresses that these practices are part and parcel of the poverty trap in which any poor country finds itself. It’s also a very ancient tradition in Africa. He does not believe that suppressing it is the best solution, since the moneylender and the customer provide a service for each other. But the authorities do have the responsibility for implementing a policy of financial orthodoxy.
Jonas Ouedraogo from Burkina Faso, is a professor of sociology. He believes that the best solution is to legalise the activity, thus allowing both the creditor and the customer to limit the risks involved.
According to Jean Blaise Tsapi from Cameroon, the practice must be eliminated, since the level of criminality is affecting public finances.
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