Banking sector needs 'corporate rescue culture'

Editor, RE: “Rwanda’s banking sector stable – BNR” (The New Times, September 2).
New clients consult bank officials at Bank of Kigali mobile banking van recently. (File)
New clients consult bank officials at Bank of Kigali mobile banking van recently. (File)

Editor,

RE:Rwanda’s banking sector stable – BNR(The New Times, September 2).

The banking sector in Rwanda might be stable, but during our project for the Rwanda Development Board we talked to a lot of people in the country about the banks’ support to companies in financial distress.

The banking culture should be changed so it will create a “corporate rescue culture” and it involves all stakeholders, including the banks in Rwanda. In, among others, Europe and the United States, when companies are in financial difficulties or seem in danger of being so they are often placed under a so-called Intensive Care Department (also called a Debt Recovery Unit, Workout Department or Rescue Unit).

Such a department (set up at most Dutch and United Kingdom banks at the end of the seventies in a period of severe economic crisis) is responsible for handling problem credits/loans. Here the bank focuses on securing provided credits, but it actually concerns the support/monitoring of the company during restructuring and revitalizing.

After all, once the company is healthy again, the credits are “safe”.

In order to do this, the following actions should be taken:

Awareness should be created among bankers/banks in Rwanda about the advantages of setting up specialized Intensive Care Units dealing with troubled SME (and larger) clients;

A new profession called “Restructuring Banker” should be created in Rwanda;

Awareness should be created among the business community in Rwanda about the new breed of restructuring bankers and the new Intensive Care Units in the banks;

Banks, together with the business community, should draw up practical guidelines for how to work together when a company hits heavy weather;

A local federation for turnaround and insolvency professionals including restructuring bankers should be established.

We wrote a position paper about this issue with more details on how to create a Rwandan Rescue Culture.

Arnoud Griffioen

 

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