Debt and debt recovery: strategies and approaches for an improved recovery rate


The debt situation in Ghana

In recent times, the discussion on debt and debt servicing arrangements has dominated our public discussions due to the ongoing efforts by government to restructure Ghana’s public debt through what has been described by industry players as “haircuts” under the Domestic Debt Exchange Programme (DDEP) and its related initiatives for foreign creditors as announced earlier by government.

While several reasons (including economic mismanagement) may be given for the accumulation of our public debt to the current unsustainable levels by government, the outbreak of COVID-19 pandemic and ongoing Russian-Ukraine war with its attendant global economic challenges, the disruptions to global production and supply chains among others, may have partly played a role in Ghana’s current economic crisis.

While the effects of all this turbulence in the global economy have undoubtedly put governments around the world in very tight fiscal situations, individuals and businesses have also not been spared the negative effects of this ongoing global economic crisis – resulting in untold and unimaginable hardships to businesses in particular, and thereby putting a strain on their ability to honour commitments and other operational expenditures; including the servicing of existing debt obligations.

In Ghana today, the debt situation has been compounded by our unique set of economic crises: such as high-interest rates, which have significantly increased the cost of borrowing and doing business in general; a fast-depreciating currency against major trading currencies; increasing fuel prices and frequent increases in the cost of living, among others.  The net effect of all these negative economic indicators is huge for businesses; not only for their operations, but also for their very survival.

For most businesses, the current economic situation poses significant existential questions that must be answered now – by taking a second look at their business models and responding to changes in the market appropriately in order to survive. The accumulated effect on businesses, especially, is an impairment of their ability to access credit; and for those who have existing repayment obligations, their ability to repay existing credits.

Evidence in recent times seems to suggest that it is becoming increasingly difficult for businesses to recover monies owed them by way of debts; and for those who owe too, their ability to repay or service their debts has been affected significantly in the last two years… thereby increasing the risk of debt defaults. It is important to emphasise that, genuinely, many debtors are not in a position to discharge their debt liabilities due to the current unhealthy business climate businesses have been overwhelmed with.

For those businesses who have lent monies but are unable to recover same, this has huge implications for their continued existence and ability to sustain their operations. As noted earlier, there is a commonly held belief that there is now more than ever a heightened sense of likely increases in the risk of debt default.

At all levels – government, businesses and individuals – there is an urgent need to rethink debt and debt-servicing arrangements to ensure the settlement of outstanding liabilities in ways that promote fairness and equitable recovery of owed amounts, all within the framework of the law.

The law on debt and debt-recovery

In Ghana, there is a comprehensive legislative regime that regulates various debt forms and their respective recoveries. These legislative provisions rooted in contract law, borrowing, lending, banking, specialised deposit-taking activities, etc. provide an enforcement regime for resulting debts and their recoveries – and by practice generally enforceable by resorting to the court system.

The obvious rationale for the extensive legislative support for debt and its recovery in Ghana is to eschew unjust enrichment on the part of both the creditor and the debtor. To this end, various conditions precedent may have to be honoured depending on the type of debt to enable its enforcement by the courts.

Nonetheless, the court system has not proven to be a ‘fit for all’ avenue for debt-recovery; as concerns such as the high cost of litigation, delays and the ability to recover judgment awards from judgment debtors continue to dominate discussions on use of the court system for debt-recoveries.  Indeed, it is not uncommon for a party to go to court for an order to recover monies owed, only to find out that the defaulting party has no money or assets to be used to settle the said debt and/or its accruing interest.

Many factors account for the challenges associated with use of the court system – including its strict adherence to established rules, procedures and precedents. To address some of these challenges, Alternative Dispute Resolution (ADR) mechanisms have been developed – backed by legislation to support an informal approach to resolving disputes in Ghana. Equally, these mechanisms offer creditors the right to pursue debt-recoveries – although outcomes may not be guaranteed.

Improving the chances of debt recovery

In these uncertain times, it is imperative for businesses to adopt strategies that will promote high debt recovery rates – in order to foster their business survival. In this regard, the following are some strategies to consider:

  1. Know your customer – Your knowledge of the person/entity that you are extending credit or lending money to is so crucial to understanding and/or guaranteeing the ability to recover such debt when it becomes due and payable. While this may not entirely assure one of repayment, it is an important step in ensuring that even if there is a debt default and one takes lawful steps to recover, the person or business will be in a position to repay.

As already noted, oftentimes many creditors are able to secure judgments in court to recover monies/debts but are unable to recover any – as a result of the fact that the debtor may be a person of straw or of little means. So, it is important that as a business before you lend money or extend credit to a person or business, you must be completely satisfied that the person or business has the capacity to repay under the due conditions of amount and time. This requires a lot of due diligence and background checks to ensure that the person or business is creditworthy and stands capable of servicing the loan or debt.

  1. Know thyself – Similarly, it is important that as a creditor you fully understand your risk levels, credit appetite and ability to continue in business despite resultant debts remaining unpaid. It goes without saying that you do not lend more than you can afford to lose or live without. This is particularly true for startups and small- to medium-scale enterprises, which typically have relatively limited operational funding.

The most vulnerable of this group may perhaps be the businesses and business owners who might not be able to draw the line between what constitutes a business resource and that of their owners – especially when it comes to lending or extending credit to friends and family.

The ultimate strategy for businesses, therefore, is not to become too comfortable and extend or lend more than the business can be able to operate and survive without. This will ensure that in the event of debt default, that default may constitute a far less significant portion of the working capital or debt portfolio of the business – and preclude facing insolvency challenges and liquidity problems.

  1. Have a clear enforceable agreement – It is paramount that in order to increase one’s ability to recover debts, the underlying transaction must be enforceable both in form and substance.

In form, generally, all terms agreed upon must be put in writing and signed by all the parties. It is true that oral agreements and transactions are equally enforceable in law, but those are generally far more complicated and difficult to prove in court – particularly when the party who is in default denies the claim of an existing agreement and shifts the burden of proof to the creditor. So, to increase the chance or potential of debt recoveries, it is important that the underlying transaction is recorded in writing and signed by both parties.

Additionally, the creditor must ensure the nature of a transaction is legally permissible to facilitate its enforcement based on substance. An accruing debt from an illegal activity is unenforceable, null and void ab initio. Therefore, businesses must ensure transactional activities which result in the accumulation of debts are permissible activities and not prohibited by any law or regulations in force.

  1. Know the laws which apply to the debt arrangement – This is particularly true when dealing with foreign entities, especially for businesses that have presence in other jurisdictions. It is important to emphasise that whereas by relevant laws of the Republic of Ghana it is entirely possible to enforce judgments and orders from other countries, that dispensation is not applicable to judgments from all countries in the world. This dispensation for the enforcement of judgments, including judgment for the recovery of debts, is limited only to countries that have reciprocity arrangements with Ghana.

What this means, in simple terms, is that it is only judgments from countries having an agreement with Ghana which can be enforced in Ghana; because Ghanaian court decisions can also be enforced in such countries. Under Ghanaian law, therefore, it is only the following countries which have reciprocity arrangements that are enforceable: namely judgments from Brazil, France, Israel, Italy, Japan, Lebanon, Senegal, Spain, United Arab Emirates and the United Kingdom.

It is important to mention, however, that even for those countries it is not every decision of their courts that will be enforced in Ghana. The judgment must be from a designated court under the law or reciprocity arrangement; it must be final as between the parties, and must be for the recovery of money said to be due and payable as determined by the judgment. It is therefore important that businesses are properly guided when making commitments outside Ghana, so as to know the implications and nature of these contractual claims.

Some useful approaches to debt-recovery

Debt owed must be paid – clear and simple. However, the likelihood of recovery is highly dependent on the approach a creditor adopts – especially when debts have remained outstanding long after their due dates. While some of the approaches discussed below are already commonly used, a rethink of their deployment will enhance the chances of debt-recovery as lawful means of doing so. The renewed approach must focus on understanding the nature of the underlying transaction, the nature of the debt, the incidence of an enforceable claim among others to ensure their optimisation.

  1. Demand notices – Once an owed debt is due and outstanding, the creditor is expected to make a demand for payment. Through letters sent to the debtor, often by lawyers of the creditor, demands are made for immediate payment of a debt owed within a specified period. Further, the creditor gives an indication of the next steps, including filing a suit in court, should the demand for payment not be honoured within the specified time.

It is expected that such demand letters outline accurately the circumstances leading to accrual of the debt demanded or the agreement between the parties, especially when it relates to transactions.

This is an important first step in any effort to recover debts as it may actually lead to successful recovery, whereby the debtor does not dispute the claim or opens an avenue for negotiations leading to a successful settlement. Even more so in instances when a debtor denies the claim, the basis of denial will usually be communicated in a reply to the demand letter.  Before sending out these letters, it is important to be fully satisfied with many legal considerations; including the period of limitation for enforcement of contractual claims – which in the case of Ghana is 6 years.

  1. Court-related recovery – The failure, neglect, or refusal by a debtor following the expiration of payment periods specified in demand notices for the payment of due and outstanding debts may lead the creditor to pursue a court-related recovery. The traditional court-related recovery (litigation), by far, has become the most common of strategies for debt-recovery – although sometimes it’s costly to businesses.

Regulated by rules, procedures and precedents, a court-related recovery could be fast-tracked or prolonged depending on the attitude of a debtor who is served with court processes and the strategy of the opposing counsel.

Also, other opportunities exist for preservation of the status quo – properties among others which have the potential of affecting the benefits of an adjudicated outcome, especially through injunctive orders by the courts.  Nonetheless, it is important to emphasise that the Court process is adversarial and not entirely conducive when it comes to ensuring the parties are able to maintain a working business relationship after the case is finally determined.

  1. Court-connected ADR – Similarly in use is the court-assisted settlement and mediation procedure provided for under the rules of court, especially at the High Courts and Circuit Courts, for settling commercial disputes. It is gratifying to note that the Court system highly encourages the settlement of commercial cases and provides a legal regime that enables the Court, through the judges, to encourage the parties to consider a mutual settlement of the dispute between them without the necessity of a full trial.

When this is done and an agreement is reached, it becomes a judgment of the Court and binding on the parties. This procedure is particularly designed for commercial cases by reason of the Court’s recognition that when commercial cases prolong, it has a tendency to discourage businesses from pursuing the resolution of disputes in court – as long delays have huge implications for businesses and their operations, and in some instances the very survival of the business.

So, it is important for businesses to take advantage of the court-assisted ADR settlement mechanisms – even when they are already at court in debt-recovery actions – to save time and cost which is often associated with full litigation.

  1. Alternative Dispute Resolution (ADR) processes – These are a range of processes backed by law and independent of the court system which allow parties to resolve their disputes without intervention of the Court. ADR mechanisms have proven to be highly effective and the preferred option, especially when dealing with instances that require immediate resolution.

These procedures employ a range of mechanisms including arbitration, negotiation, mediation and conciliation as means of resolving disputes amicably between the parties without recourse to litigation. In the course of these processes and proceedings, the parties may be able to come to an amicable settlement and resolve their dispute without going to court. As noted earlier, this is particularly useful for businesses seeking to enforce a commercial claim.

While ADR mechanisms can be used based on the willingness of the parties involved, their inclusion in underlying transactional agreements or contracts as the first attempt at dispute settlement could make them a mandatory option and a condition precedent to the activation of a court action. The use of these mechanisms in debt recovery has proven to be very useful, especially for businesses as they help to save time and preserve the business relationship between the parties.


There is a high risk of debt default, perhaps more than ever in history, and businesses are having great difficulty in recovering their debts. It has equally become difficult for many businesses to discharge their debt obligations to their creditors, their best intentions notwithstanding. Therefore, the approaches and strategies considered in this article could be useful tips for rethinking debt and debt-recovery in Ghana, and they are highly recommended for businesses going forward.

>>>the writer is a Senior Associate at Sustineri Attorneys PRUC ( a client-centric law firm specialising in transactions, corporate legal services, dispute resolutions, and tax. His practice areas include Disputes Resolution, Tax, Natural Resources, and Energy, including Renewables and Mining. He welcomes views on this article at [email protected]

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