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Periodical article Periodical article Leiden University catalogue Leiden University catalogue WorldCat catalogue WorldCat
Title:Towards an efficacious legal framework for debt recovery in developing countries
Author:Oladele, O.O.
Periodical:Lesotho Law Journal: A Journal of Law and Development
Geographic term:Nigeria
Subjects:debt relief
Abstract:Debt default is a potential source of systemic risk for the entire global financial system. Factors contributing to loan default and loan accumulation include borrowing to service short-term loans, overvaluation of security, undue influence of bank owners and insider abuse, wilful default, the granting of credit without collateral security, information asymmetry about borrowers, high interest rates, an inefficient judicial system, slack law enforcement and corrupt practices, government ownership of banks and inefficient supervision of the financial system. In Nigeria, bad loans, insider lending, dissipation of depositors' funds and loan frauds largely accounted for the insolvency of many banks between 1988 and the end of 1999. The legal responses to debt recovery include banking regulation, creation and foreclosure of collateral securities, recovery through judicial proceedings as well as alternative special judicial tribunals, the application of insolvency law, contract enforcement and the corporate limited liability device. Ongoing and future reforms should seek first to facilitate debt repayment, and residually to penalize default. Notes, ref. [ASC Leiden abstract]