A close friend is about to start a microfinance bank and he needs advice on how to handle loan defaulters.

When a customer fails to repay a loan, is it legally right to seize the stock of the customers shop or several items in the customers house to be sold by the bank to recoup the loan? (Like using stock In borrowers shop and items in the borrowers house like television, refrigerator e.t.c as loan collateral)

(Note that they have already agreed to this condition when they sign the loan agreement and it is clearly stated that in the event of loss of money when the bank raids the shop, or house, the bank will not be held liable )

Also, what other methods can be used to handle debtors apart from guarantors ( as most of the borrowers don't always have people who are willing or financially buoyant enough to guarantee the loan)

Thanks as I await your comments

Each borrower should sign a personal guarantee which should have a clause enabling the bank to have a lien on the personal assets and goods in shops/houses of each borrower should indebtedness arise....

ultron12345:
A close friend is about to start a microfinance bank and he needs advice on how to handle loan defaulters.

When a customer fails to repay a loan, is it legally right to seize the stock of the customers shop or several items in the customers house to be sold by the bank to recoup the loan? (Like using stock In borrowers shop and items in the borrowers house like television, refrigerator e.t.c as loan collateral)

(Note that they have already agreed to this condition when they sign the loan agreement and it is clearly stated that in the event of loss of money when the bank raids the shop, or house, the bank will not be held liable )

Also, what other methods can be used to handle debtors apart from guarantors ( as most of the borrowers don't always have people who are willing or financially buoyant enough to guarantee the loan)

Thanks as I await your comments

Which state does he/she intend running the office?

DrUche3:
Which state does he/she intend running the office?

edo state

FirstCounsel:
Each borrower should sign a personal guarantee which should have a clause enabling the bank to have a lien on the personal assets and goods in shops/houses of each borrower should indebtedness arise....

nice suggestion, thanks

ultron12345:
edo state

Since he's just starting up does he loan those not within the state but within south-south region?

Ensure they meet up up with the 5 Cs of lending especially character and capacity

DrUche3:

Since he's just starting up does he loan those not within the state but within south-south region?

CBN has made it mandatory that all lending for a unit mfb must be made and utilized within the Local govt. area where the bank is......so he can't lend outside the LGA

Nairasolutions:
Ensure they meet up up with the 5 Cs of lending especially character and capacity

when these people are collecting loans, they are so meek and humble but when its time to repay, their character changes, they become so hostile

ultron12345:
CBN has made it mandatory that all lending for a unit mfb must be made and utilized within the Local govt. area where the bank is......so he can't lend outside the LGA

Hmmmmmmh... ok