Save viable firms facing temporary distress – BoG Governor tells banks

Bank of Ghana Governor, Dr. Johnson Asiama, has urged banks to develop better mechanisms to support distressed but viable businesses, without relaxing credit discipline.

Speaking at a forum organized with the Chartered Institute of Restructuring and Insolvency Practitioners on non-performing loans and restructuring, Dr. Asiama said financial difficulty should not automatically mean a company has failed.

He explained that some businesses still have customers, staff and existing contracts, but are struggling only because they lack working capital to complete projects.

*“Because a business in difficulty is not always a business that has failed. Sometimes the orders are still there. The customers have not left. The staff turns up. What is missing is the working capital to finish contracts already signed, and without it a company that could have recovered goes under,”* he said.

The Governor said the main challenge is finding a balance between helping struggling companies and protecting the integrity of the banking system.

*“The question we put to the room was a hard one: how do banks lend to a distressed but viable company without weakening credit discipline or concealing losses?”* he asked.

Dr. Asiama noted that the Corporate Insolvency and Restructuring Act, 2020 (Act 1015) provides a legal basis for rescuing viable firms instead of liquidating them. However, he said banks need practical tools to be able to lend confidently under that framework.

*“Act 1015 gave us a framework for rescuing viable businesses instead of liquidating them. The work now is to make that framework something a bank can actually lend into,”* he stated.

He cautioned that many companies with potential to recover should not be shut down simply because lenders are unsure how to handle restructuring cases.

“A company worth saving should not close for want of a decision nobody was sure how to make,” Dr. Asiama added.