Processes Parties Must Follow After Default

(a) Notice of Default

• The Microfinance Institution (MFI) must issue a written notice to the borrower, informing them of the default, the outstanding amount, and giving them a chance to remedy the breach within a reasonable period (typically 14–30 days).
• This requirement stems from general principles of fair contract law and consumer protection.

(b) Alternative Dispute Resolution (ADR)

• If the loan agreement includes an ADR clause (e.g., mediation or arbitration), the MFI must attempt to resolve the dispute outside court first.

(c) Commencement of Legal Proceedings

• If the default remains unresolved, the MFI may issue a civil summons against the borrower to recover the outstanding debt through the courts.

(d) Court Judgment

• If the borrower does not defend the claim, the MFI may obtain default judgment. •If defended, the matter proceeds to trial and the court adjudicates on the merits.

2. Borrower’s Rights Regarding Interest

(a) Right to Full Disclosure of Interest

Under the Microfinance Act [Chapter 24:29] and general Consumer Protection Laws:

• Borrowers have a right to clear, upfront disclosure of the total cost of credit, including the Annual Percentage Rate (APR).
• All hidden charges or undisclosed fees are prohibited.

(b) Right Against Usurious (Excessive) Interest

• If an interest rate is unreasonably high and unconscionable (grossly unfair), the borrower can challenge the enforceability of the loan agreement under contract law principles (doctrine of unconscionability).
• Some jurisdictions set specific statutory caps on microfinance interest rates; Zimbabwe currently leaves it to regulation.

(c) Right to Claim Damages for Unlawful Conduct

• If the MFI uses abusive, coercive, or illegal methods of debt collection, the borrower has a right to sue for damages under common law torts such as harassment or duress, and under specific statutes like the Consumer Protection Act.

3. What Can Be Executed Upon After a Lawful Judgment

Once the MFI obtains a lawful court judgment, execution can proceed against the borrower’s property to satisfy the debt:

(a) Attachable Property Execution can be levied against:

• Movable property:
• Cars, furniture, electronics, farming equipment, stock-in-trade.
• Immovable property:
• Houses, land (subject to formal registration processes under the Deeds Registries Act [Chapter 20:05]).

Limitations:

• Some items are legally protected from attachment (e.g., essential household goods, basic clothing, and medical supplies necessary for survival).

(b) Bank Garnishee Orders

• •The creditor (MFI) may apply for a garnishee order to attach funds held in the borrower’s bank accounts.

(c) Salary Garnishment

• If the borrower is formally employed, the creditor can seek an order compelling the employer to deduct a portion of the borrower’s salary towards the debt.

4. Borrower’s Legal Protections Against Execution

(a) Exempt Property

• Certain property is legally exempt from execution, protecting borrowers’ minimum means of subsistence (e.g., under Sheriff of Zimbabwe Rules and humanitarian principles).

(b) Setting Aside Execution

A borrower can apply to set aside an execution order if they can prove:

• The judgment was obtained irregularly;
• The debt has been paid or settled;
• There are other equitable grounds (e.g., hardship). This application is made by way of a court application supported by a sworn affidavit.