The debt collection and recovery procedures and requirements by microfinance service providers in Tanzania.

(Microfinance (Non-Deposit Taking Microfinance Service Providers) GN No. 679 of 2019)

Rule 56 of Microfinance (Non-Deposit Taking Microfinance Service Providers) GN No. 679 of 2019 outlines the procedures and requirements for debt collection or recovery by microfinance service providers:

Subsection (1): A microfinance service provider must follow the recovery procedures prescribed in its lending policy when collecting or recovering loans from borrowers. These procedures should align with the policies established by the microfinance service provider in accordance with section 51 of the Microfinance Act, No 10 of 2018.

Subsection (2): This subsection sets the standards for debt collection practices to ensure they comply with consumer protection principles. A microfinance service provider is required to:

Issue a written notice: Provide the borrower with a 14-day written notice before initiating the debt collection or recovery process.

Avoid harassment or abuse: The service provider must not harass, abuse, or oppress the borrower, guarantor, or any other person in connection with debt recovery.

Prohibit the use of violence: Threatening or using violence, illegal means, or oppressive actions is prohibited.

Refrain from using obscene language: Obscene or profane language should not be used in the debt collection process.

Avoid false or misleading representations: The provider must not engage in deceptive practices such as misrepresenting the character, amount, or legal status of a debt, claiming to be an attorney, making false threats of legal action, or communicating false credit information.

Subsection (3): A microfinance service provider is prohibited from collecting interest, fees, charges, or expenses that are not specified in the loan agreement.

Subsection (4): A microfinance service provider may hire a debt collector to recover a loan, provided that the debt collector:

Has the necessary license: The debt collector must be licensed under relevant law.

Complies with debt collection requirements: The debt collector must adhere to the consumer protection principles and the prescribed regulations in subsections (2) and (3) above.

Follows relevant laws: The debt collector must comply with applicable laws regarding debt recovery.

If the debtor refuses to pay or if informal recovery efforts fail, a creditor may seek a court order to collect the debt. This involves filing a lawsuit and obtaining a judgment from the court. If the court rules in favor of the creditor, the creditor can take further action, such as seizing assets, or other methods allowed by law to enforce the judgment.