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How to collect an unpaid invoice from a debtor in Nairobi?
If you need help retrieving an owed amount in Nairobi, Kenya, then you've come to the right place. This guide will provide you with all of the information you need. If you'd also like assistance from a debt collection agency or lawyer from the area, simply fill out our form and you'll receive 3 free quotes within 2 days!
Overview of the debt collection process in Nairobi
In Nairobi, the debt collection process is multi-stepped and customized to each specific case. We first assess the size of the claim, the kind of debtor, and other relevant conditions. After gathering all pertinent details, we personalize our collection efforts to best fit the situation and maximize debt recovery. Our approach is proven to produce the highest recovery rate.
The image below explains our standard framework for collecting debt in Nairobi:
Step 1: Find a local collection agency or attorney
Upload your situation to Debitura and you will be given 3 estimated amounts by Nairobi debt collection agencies that would be able to support you.
Step 2: Pre-legal collections
We begin with a series of notices through a variety of methods, including email, SMS, post, and other media in Nairobi. The purpose is to make contact and encourage payment or agreement to an installment plan, and the cost is only a small success fee if the debt is requited.
Step 3: Evaluation:
If you have not been given payment by the debtor after the preliminary measures, it is time to decide on the next move. We will assess the amount of your claim, the possibilities of payment and the applicable laws in Nairobi to tell you which route is most suitable. There are three common steps that may be taken in Kenya:
Step A: Surveillance:
If the amount of money you are claiming is less than $5000, it may not be advantageous to proceed further with legal action. So we suggest "debt observation", where we will keep attempting to get in touch with your creditor and try to come to an agreeable agreement. This type of debt monitoring is essentially a pre-legal phase that continues over time. If any changes or developments happen, we will tell you what we think you should do.
Step B: Legal collections:
We advise you to commence a legal action if your claim is of a considerable value, with an amount of $5,000 being the normal threshold. The right course of action relies on various factors such as the debtor's capability to pay and their response to prior legal communications. Smaller claims, as a rule, can be dealt with in a simpler legal manner. Generally, legal collection could take up to 18 months with an initial fee to cover legal expenses. It is recommended to get price estimates from several debt collectors in Nairobi to pick the best deal.
Step C: Debt enforcement:
If the debtor has accepted your claim or you were given a court order, you can employ the use of a bailiff to put it into action. This procedure is said to normally take 12-18 months to complete in Nairobi, and you must typically pay a court levy as well as lawyer fees to your debt collection lawyer. The amount you have to pay is contingent on the amount of your claim. To get a specific price approximation, simply upload your claim to Debitura.
Pre-legal debt collection in Nairobi
Pre-legal debt collection involves chasing debts from borrowers before the courts become involved. This initial stage of the process - often referred to as 'amicable collection' - can be very beneficial for creditor/debtor relationships. It's quicker than formal legal proceedings and carries no associated financial risk, with fees only charged if the debt is resolved. Speak to your borrowers to understand the situation; negotiate an agreement and work together to find a positive resolution.
This is referred to as "third-party collections". Alternatively, we can do the recovery of debt process in-house, which is known as "first-party collections".
In first-party collections, the business who is owed oversees their own debt collection, from sending payment reminder letters to initiating calls and visits from debt collectors. On the other hand, third-party collections involve an external debt collection agency helping to recover the debt. They will contact the debtor for payment and take legal action if necessary.
Offering accurate information to the debtor
Inviting the debtor to negotiate a payment plan or settlement
Always responding promptly to communication from the debtor.
You may levy an interest rate and additional late payment fees on top of the principal of your claim – the exact fees depend on the size and age of your claim. This helps protect your business and investments, allowing you to maximize returns.
Let us help you save time and money by executing your debt collection efficiently and in full compliance with the Law.
Legal debt collection in Nairobi
When it comes to collecting a debt, it is important to know your options. One of the most effective routes is to pursue an amicable phase first. This may involve sending letters, making phone calls, or other methods of communication. If this route fails, however, and your claim remains unpaid, it may be time to consider legal action.
Legal debt collection is costly and time-consuming, making it more suitable for higher-value claims. We usually only recommend taking legal action if the debt exceeds $5,000 (or the equivalent in local currency) as this approach can prove more financially viable.
When you decide to go down the legal route, it is advisable to first seek professional advice. An experienced legal professional can guide you through the process and provide support every step of the way. With the right legal advice, you can get the money you are owed with greater efficiency and less risk.
Debitura makes it easy for customers to get free quotes from local debt collection lawyers who can help them with legal debt collection in Nairobi. We provide 3 quotes from our partners, allowing customers to compare costs and steps needed with ease. This makes it a hassle-free, cost-effective way to receive professional legal help with debt collection.
Legal debt collection in Kenya follows a set of specified steps. Initially, a local partner will contact the debtor in an attempt to come to an agreement about a payment plan. If this does not work, legal actions based on the civil Law will be taken. Depending on the size of the claim, these could include litigations, debt enforcements, mediations or bankruptcy proceedings. The entire process generally takes 12-18 months to complete.
Cost of debt collection in Nairobi
Average success fee for pre-legal debt collection in Nairobi
Debt collections in Nairobi generally come with a success fee if the debt is recovered. This fee is linked directly to the size of the claim, therefore the cost of debt collection will vary in accordance. On average, amicable collections tend to have a success fee attributed to them.
Hourly rate for legal-debt collection services in Nairobi
In regards to debt collection in Nairobi, there are two costs one needs to consider: the legal court taxes associated to the claim, and the charge for the legal expert who will take care of the matter. Depending on the complexity of the claim and the hourly rate for the legal assistance, the final cost may end up being different.
Nairobi city risk profile
We have looked at Nairobi's critical financial data and extrapolated a risk assessment. You can use this analysis to guesstimate your payment terms and control the risk when trading and doing business with customers in Nairobi.
Our analysis has shown that the risk of conducting business in Nairobi is medium.
Based on this medium score, we recommend being careful providing credit and considering charging upfront payment or using credit insurance when trading if you don't know the customer in Nairobi well. If possible, provide a short credit period or even better upfront payment.
The medium risk score is based on the following factors:
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Economic risk in Nairobi
Kenya is a medium-sized economy with a GDP of 110.35 billion USD, growing by 7.52% annually. Per capita GDP is 2006 USD and purchasing power parity is 4572.67 USD, making it lower than other countries. Considering economic risk factors, Kenya has a high economic risk rating of 5 out of 6. This rate is considered average in Africa. The country has a high inflation rate of 6.1% and an interest rate of 12.08% for businesses. These statistics show Kenya holds potential for economic growth but has a lower purchasing power for citizens.
Business risk in Nairobi
Business in Nairobi can be a risky venture as recent analysis estimates the business environment risk level in the city to be 5 out of 6. This is an average risk rating, compared to other cities in Africa. Examining the details of the rating, the property rights index is at a respectable level of 60 and the business freedom index stands at 57. Additionally, the overall economic freedom index is 55, indicating a degree of uncertainty for businesses operating in Nairobi. All in all, businesses in the city face moderate levels of risk and should be aware of the factors affecting their operations and investments.
Political risk in Nairobi
Nairobi, the capital of Kenya, is known to have a relatively low political risk score in Africa, with a score of 4 out of 6. However, this is deceiving given the weak score of the governance and political stability indicators. The Rule of Law Index, for instance, is at -0.39 meaning it close to impossible to enforce contracts. The government effectiveness index, control of corruption and political stability index are also far below expectations at -0.33, -0.71 and -1.09 respectively - all signs of a weakened political landscape. Kenya also has one of the largest shadow economies in the world, which makes up 33.43% of the country's GDP, further reducing the stability of doing business in this city. Business owners and investors should pay special heed to the political risk in Nairobi when looking for opportunities here.
Commercial risk in Nairobi
Nairobi, Kenya's capital, has a relatively low commercial risk score of 2/4 in the country's model. This is slightly lower than the average commercial risk across Africa. Analyses of Kenya’s key international trade relationships illustrate this from the foreign exchange reserves of 9.49 billion USD to the negative trade balance of -9.53% of GDP due to more imports than exports. There is nevertheless growth in export goods and services as 10.57% of GDP annually and 20.1% of goods and services imports also in the country.
Financial risk in Nairobi
The bustling city of Nairobi poses a medium financing risk to potential creditors. Credit information sharing is high, with an 8 on a 0-8 scale, so creditworthiness is accessible. Legal rights of creditors and borrowers are strong with an index of 11 out of 12. Interest rates on bank credit to the private sector remain high at 12.08%, making Nairobi an average risk in terms of medium financing risk for countries in Africa. Real interest rate is 6.74% when taking into account the rate of inflation. Credit rating agencies are available to help potential creditors analyse the creditworthiness of customers.
Looking for more detailed information? Then have a look at our country guide.
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