Designing an Effective and Efficient Insolvency Code for a Tanzanian Market Economy
Isaya J. Jairo* (Senior Lecturer in Accounting and Finance, Institute Finance and Management (IFM) Dares Salaam )
Download Article | Published On 01/03/2003


During government ownership public corporations dominated the economy and some used to be subsidized and kept going even when they were technically bankrupt. Given that situation the insolvency code was not playing its role and its shortcomings could not be detected. Bankruptcy laws have a major impact on lender-borrower relationships and therefore on the structure of ownership and capital in companies. Investors take into account the fact that the design and the direct and indirect costs of a bankruptcy process differ among countries. These aspects of the code influence borrowing and lending decisions. This paper reviews the Tanzania insolvency and related legislation, comparing their efficiency against a number of benchmarks. The benchmarks are a result of a study of eight insolvency codes those of UK, US, France, Germany, Italy, Canada, Japan and Sweden. UK was the source of Tanzanian code. Other codes have been selected because they cover a broad spectrum of the competing debtor-and creditor­ oriented insolvency procedures. The Swedish auction bankruptcy system provides a peculiar additional alternative. The paper discusses the spirit behind different codes and explores economic and financial implications for adopting a particular alternative, before making suggestions on how to come up with an effective and efficient bankruptcy law.

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