BoG Governor urges banks to save viable companies facing temporary distress

Governor of the Bank of Ghana (BoG), Dr Johnson Asiama, has called for stronger mechanisms to enable banks to finance distressed but viable businesses without undermining prudent lending standards or weakening credit discipline.

According to him, companies experiencing temporary financial challenges should not automatically be written off, as many remain fundamentally sound and could recover with timely access to working capital.

Dr Asiama made the remarks at a forum organised in collaboration with the Chartered Institute of Restructuring and Insolvency Practitioners on non-performing loans (NPLs) and financing for companies undergoing restructuring.

He said the banking sector must find a balance between supporting struggling businesses and safeguarding the integrity of the financial 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 said.

The BoG Governor observed that many businesses facing financial distress continue to have viable operations, loyal customers and confirmed contracts but are constrained by short-term liquidity challenges.

“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 explained.

Dr Asiama noted that the Corporate Insolvency and Restructuring Act, 2020 (Act 1015), provides a legal basis for rescuing financially distressed but viable companies instead of pushing them into liquidation.

He, however, stressed that the legal framework must be supported by practical financing solutions that give banks the confidence to lend to companies undergoing restructuring.

“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 further argued that businesses with realistic prospects of recovery should not be forced to shut down because of uncertainty or delays in restructuring decisions.

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