Debt collection in Tanzania

The debt collection procedure in Tanzania begins with an assessment of the debtor’s solvency, business activities, company history, documentary evidence of the debt, current court cases and enforcement proceedings, and the possibility of disputing the debt. This assessment determines the strategy that will be used on behalf of the client in the collection process.

If the debtor has no ongoing court cases or outstanding judgments for debt collection and is actively engaged in business activities, then it is advisable to use the out-of-court debt collection stage.

This stage involves active negotiations with the debtor in order to reach an agreement on payment of the creditor’s claims or other possible settlement options (e.g. return of goods, transfer of the debt to a third party, exchange of services or goods).

Interaction with the debtor begins immediately after sending a notice by mail, email, phone or instant messengers. This process involves intensive communication with the debtor in order to exert constant pressure. The main objective is to establish contact with key decision makers to achieve the fastest possible debt recovery.

The average time for informal out-of-court collection is up to 60 days (except in cases where a payment plan is agreed upon). If this stage does not bring the expected results or after an initial analysis it becomes clear that it is not applicable, it is necessary to proceed to collection through the courts.

Before initiating judicial collection, it is worth paying attention to the limitation period. The limitation period for debt collection is 6 years. The limitation period is interrupted if the debtor acknowledges the debt in writing or makes a partial payment of the debt. After the interruption, the limitation period begins to count anew.

Judicial debt collection in Tanzania is carried out in the usual and simplified procedure.

The usual judicial process begins with the filing of a claim in court. If the claim complies with the established procedural requirements, the court registers the claim in the court registry and issues a summons to appear before the parties. The summons must be served within 14 days of its issuance.

If the summons has been properly served and the defendant wishes to defend himself against the claim, he must, within twenty-one days of the date of service of the summons, file a written statement of defense with the court and appear in court on the day specified in the summons. If there are valid reasons, the defendant may ask the court to extend this period for an additional 10 days. 

If the defendant fails to file a written statement of defense within the allotted time, the court, after confirming service and the plaintiff’s oral statement to continue the consideration of the claim unilaterally, sets a date for hearing the plaintiff’s testimony on the claim.

On the appointed day, the parties are required to appear at the hearing in person or through their representatives. At the first hearing of the case the court shall ascertain from each party or his counsel whether he admits or denies such allegations of fact as are contained in the plaint or written statement (if any) of the adverse party and which are not expressly or impliedly admitted or denied by the party against whom they are made, and the court shall record such admissions and denials.

If the court finds that the parties have no disagreement on questions of fact and law, it may proceed to consider the merits of the case and make a decision at the same hearing. If there is disagreement, the court shall proceed to formulate and record the issues on which the correct decision of the case depends. In such a case, if the court is satisfied that no further argument or evidence, other than that immediately adduced by the parties, on the matters in dispute is required because it may be sufficient to decide the case and that no injustice will result from the immediate disposition of the case, the court may proceed to decide such matters and render a decision.

If the findings are insufficient to make a decision, the court postpones further hearing of the case and sets a date for the presentation of additional evidence or arguments required in the case. After considering the additional evidence, the court holds debates between the parties and makes a decision. In the court decision, the court sets the interest rate from the date of the decision until the debt is repaid in the amount of seven percent per annum or another rate not exceeding twelve percent per annum, which the parties may directly agree on in writing before or after the decision is made.

The simplified procedure applies to the recovery of debts arising from cheques and negotiable instruments. When the case is instituted, the defendant is served with a summons stating that the case is being heard in the simplified procedure and that the defendant may not defend the claim without leave of the court. If the defendant does not apply to the court for leave to defend within 21 days, the court will hear the case on the plaintiff’s arguments and evidence. If the defendant intends to defend the claim, he must apply to the court with a sworn statement and evidence in support of his position. If the court finds that the defendant’s application is valid, it will grant him leave to defend himself, in which case the case will be tried according to the rules of the usual court process. 

The decision of the Primary Court may be appealed to the High Court. A decision of the High Court may be appealed to the Court of Appeal. The time limit for filing an appeal is ninety days from the date of the contested decision.

Once the judgment has entered into legal force, the creditor must initiate enforcement proceedings. A judgment may be brought for enforcement within 12 years. Within the framework of the enforcement of a judgment, the creditor’s claims may be satisfied by seizing and writing off funds from the debtor’s accounts; seizing the movable and immovable property of the debtor with their subsequent sale; seizing and confiscating crops, seizing the debtor; seizing corporate rights in companies.

An alternative option for debt collection is the bankruptcy procedure of the debtor. The creditor has the right to initiate this procedure if the following conditions are met: 1) the amount of the debt is not less than 1,000 Tanzanian shillings, subject to payment either immediately or at a certain time in the future; 2) the debtor committed an act of bankruptcy within three months preceding the opening of the bankruptcy procedure; 3) the debtor is domiciled in Tanzania or has, for one year preceding the date of the application, ordinarily resided or had a house or place of business or carried on business in Tanzania or is or has been during the said period a member of a firm or partnership of persons carrying on business in Tanzania.

According to the provisions of the Bankruptcy Act, the following acts are considered to be acts of bankruptcy: 1) the debtor transfers his property or any part thereof to a third party; 2) the debtor transfers his property or any part thereof with the intention of prejudicing or delaying the payment of his debts to his creditors; 3) the debtor leaves Tanzania or, if outside the country, remains outside Tanzania Mainland or otherwise absconds; 4) if the property of the debtor has been sold or retained by a bailiff for twenty-one days; 5) the debtor gives notice to any of his creditors that he has suspended or is going to suspend the payment of his debts; 6) the debtor files a bankruptcy petition against himself; 7) if within seven days the debtor has failed to comply with the creditor’s demand to pay the debt on the basis of a final judgment against the debtor.

As part of the bankruptcy procedure, if the debtor’s assets are insufficient to fully satisfy the creditors’ claims, it is possible to cancel the debtor’s transactions made with the intent to cause damage to creditors. Such transactions include, in particular: 1) any disposal of property without valuable consideration; 2) any transaction in which the debtor’s counterparty knew that the debtor was in a state of bankruptcy; 3) giving preference to one creditor over others. As a result of the cancellation of the above actions and transactions, it is possible to return back to the debtor what he lost from such transactions and, due to this, increase the liquidation estate to satisfy the creditors’ claims and cover the costs of implementing the bankruptcy procedure.

If you have any questions or need support on international debt collection in Tanzania, our company is ready to provide its expert assistance to effectively resolve your financial issue. Contact us to get additional information and professional support from specialists of the leading debt collection agency.

# DEBT COLLECTION AGENCY TANZANIA

03.01.2025

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