By Scott A. Atkins (Norton Rose Fulbright)
Introduction
In Sub-Saharan Africa, [1] economic growth has remained resilient, and is projected by the International Monetary Fund (IMF) to experience a modest pickup in 2026 from the 4.1% growth achieved in 2025. [2] This is despite a challenging external environment magnified by tight liquidity and borrowing conditions, uneven prospects in commodity prices, fluctuating currencies and a deterioration of the global trade and aid landscape.
However, the World Bank has cautioned that growth is still not strong enough to significantly reduce poverty and meet people’s aspirations in the region. [3] Real income per capita in 2025 is expected to be approximately 2% below its most recent peak in 2015. The region is also struggling to create enough good jobs for its young population and public services are in decline. There are also considerable downside risks posed by changes in global trade dynamics, regional conflict and climate change affecting people and crops.
In light of these risks, the African Development Bank has called for a “paradigm shift and change in narrative”, with a reform-driven approach that will enable Sub-Saharan Africa to achieve its aspirations for growth and improved living standards. [4]
The reform of insolvency systems – with a view to maximising the chance for distressed but viable entities to restructure their affairs, and providing a simple, efficient exit alternative for unviable businesses to allow scarce capital to be reallocated to more productive uses – can play a major role in this context.
Empirical research shows the strong link between efficient insolvency systems and the achievement of economic growth and dynamism, the preservation and creation of jobs, and improvements in productivity and innovation. In establishing a certain, predictable framework for creditors’ rights in the event of financial distress, insolvency laws can also enhance liquidity in the market, with lenders more willing to advance funds, and at lower rates, essential to meet the working capital requirements of businesses looking to expand. This is especially important in Sub-Saharan Africa, where, to date, the risk of default has led to reduced access to credit, higher interest rates and a lack of effective competition in the credit system.
Many Sub-Saharan African nations have made strong progress in reforming their previously liquidation-dominant, outdated insolvency systems over the last decade to now also provide for a range of restructuring alternatives. However, in practice, the experience has been that these alternatives are rarely used, and there is still a strong stigma associated with business failure.
There is also a serious question as to whether the formal insolvency options that exist in Sub-Saharan African nations are “fit for purpose” for the unique business makeup of these nations. Notably, the cost, complexity and delays associated with these alternatives means that they are primarily suitable for large enterprises. Yet the World Economic Forum estimates that, across the region, micro and small enterprises (MSEs) account for 95% of all registered businesses and contribute around 50% to total GDP. [5] They also sustain nearly 80% of jobs in the region. [6]
This article has a number of aims. First, to take a closer look at how efficient insolvency laws can drive economic growth and jobs creation. Secondly, to recap on some of the rescue-focused insolvency reforms that have been introduced in a number of Sub-Saharan Africa nations in recent times, and the limitations of these reforms which have been reflected in practice. And finally, to look ahead to what further insolvency reforms in the region could help incentivise and empower local economies for growth.
It is suggested that the immediate priority reform areas are simplified insolvency alternatives for MSEs, and education and awareness campaigns designed to enhance debtors’ understanding and uptake of these alternatives, while also improving financial literacy and governance standards. Combined with institutional support – such as access to early warning tools to diagnose financial distress at an early stage and debt counselling to guide debtors in managing their finances and navigating the insolvency process where required – these measures can help to break down the stigma of insolvency and cultivate a genuine rescue culture in the region.
In this way, the improvement of insolvency systems in Sub-Saharan Africa can play a key component in achieving long-term economic growth in the region, and may in time provide a new paradigm for the design of a best-practice global insolvency regime.
The Link Between Insolvency Laws and Positive Economic Outcomes
It is generally considered that an effective insolvency system is one that both facilitates the reorganisation of distressed but viable businesses and also enables the simple, quick liquidation of unviable entities. [7]
Insolvency systems that promote these two core outcomes have been shown to play a significant role in economic growth, innovation, productivity improvements and job maintenance and creation. They are a vital, yet often underappreciated, component of microeconomic reform. [8]
Where an entity is in financial distress, but remains viable, flexible restructuring options maximise the potential for the company or at least its business to be saved. This prevents the needless destruction of enterprise value that would come from a premature liquidation. It also preserves jobs, existing supply chains and local communities.
On the other hand, for unviable entities, an efficient liquidation process and business exit can play an important part in maintaining dynamism in the economy. This can be conduit for boosting innovation and productivity due to the potential for non-performing loans to be effectively resolved and for scarce resources – capital, labour, skills and ideas – to be reallocated to more productive uses. [9]
Collectively, insolvency regimes with effective restructuring and liquidation alternatives can therefore provide an essential “link in the chain” in facilitating economic growth, employment and entrepreneurialism, where business failure is part of healthy, functioning economy rather than being a source of shame or stigma.
Insolvency systems of this nature can also result in the greater flow of capital in the economy, as financiers and investors are more confident their rights will be protected in the event of default. This results in a lower risk premium and a greater willingness to advance funds for business expansion. This in turn drives commercial activity, innovation, business and consumer confidence and a strong and resilient economy.
As Professor Aurelio Gurrea-Martinez notes, insolvency systems therefore play an essential role in the “real economy” and can serve as a critical “catalyst for growth”, especially in emerging markets and developing economies (EMDEs) where existing insolvency systems are typically outdated and there are significant unrealised opportunities for efficiency, productivity gains and growth. [10]
Insolvency reforms have been an important component of IMF, World Bank and Asian Development Bank supported economic programs precisely because of the positive impact those reforms can have on a country’s economic and financial system. In a July 2025 research report, the World Bank provides an outline of empirical evidence from OECD insolvency systems suggesting that:
- the introduction of simplified restructuring processes has directly helped to preserve distressed but viable companies and jobs that would otherwise be lost; and
- reforms that have been made to facilitate the exit of inefficient, non-viable companies can lead to productivity growth and encourage investment and new jobs. [11]
The Story So Far: Progress on Insolvency Reform in Sub-Saharan Africa
There has been a strong push among many Sub-Saharan African nations to modernise their insolvency laws in the last decade. The focus has been on seeking to move away from a traditionally dominant liquidation and creditor enforcement culture towards flexible reorganisation processes that maximise recovery prospects for distressed but viable entities.
The below synopsis is not intended to be an exhaustive account across each of the 48 Sub-Saharan African countries, but rather to provide an overview of some of the standout reforms in selected jurisdictions so far.
A brief overview of the new rescue alternatives
In South Africa, two new rescue processes were introduced in the Companies Act 2008: business rescue and compromises. Business rescue, under Chapter 6 of the Companies Act, is available to companies that are “financially distressed” (reasonably likely to be unable to pay their debts in the next 6 months or to become balance sheet insolvent in that time).
Business rescue can be initiated by board resolution or a court application from a creditor, shareholder or other affected stakeholder, and leads to the appointment of a business rescue practitioner, to whom management powers are transferred, and a moratorium on creditor enforcement. The business rescue practitioner then seeks to develop a rescue plan to put to creditors for a vote. The plan requires the support of 75% of the total value of claims, 50% of which must be constituted by independent creditors, to be passed, failing which the business rescue process converts to a liquidation absent a court order to the contrary.
The compromise procedure is available under section 155 of the Companies Act, and is a flexible means for a company to restructure its financial obligations to creditors, or certain classes of creditors. While a compromise provides for a broader entry mechanism – so that it can be pursued by a company even if it is not financially distressed – there are strict approval conditions, requiring the consent of 75% in value of each class of affected creditors, as well as court sanction, and no provisions for cross-class cram down. Further, there is no enforcement moratorium while a compromise is being negotiated, unless it is expressly approved by creditors, and even then a moratorium is only binding on creditors that have consented.
In Ghana, significant reforms were made to the insolvency regime in 2019 and 2020 with the intention of improving the country’s ranking of 161 out of 190 economies in the World Bank’s Ease of Doing Business Rankings at the time. Prior to the reforms, the insolvency system was contained in the Companies Act 1963 and the Bodies Corporate (Official Liquidation) Act 1963, which favoured the liquidation of distressed entities and did not provide for genuine rescue alternatives.
The insolvency framework in Ghana is now set out in the Companies Act 2019 and the Corporate Insolvency and Restructuring Act 2020. The latter Act introduced an overhauled administration process, under which an administrator takes control of the company’s affairs and seeks to develop a restructuring agreement to put to creditors, with the benefit of a broad enforcement moratorium on creditors’ claims. A restructuring agreement comes into effect if supported by at least 51% of creditors.
The Companies Act 2019 introduced a new compromise process, drawing on the South African approach. Thus, where a majority of the members of a company and its creditors (each representing at least 75% in value of the class of members or creditors concerned) approve a compromise, it can then be presented to the court for sanction. If sanctioned by the court (taking into account fairness considerations for creditors), the compromise is binding on the company and all members and creditors concerned, including any dissenters.
In Kenya, the Insolvency Act 2015 introduced company voluntary arrangements and administration as alternatives to liquidation. In 2021, the Act was amended to also provide for a pre-insolvency moratorium. This is an especially welcome innovation, designed to give a company that is in financial difficulties or that is facing imminent insolvency breathing room to explore a restructuring attempt.
The pre-insolvency moratorium is a debtor-in-possession (DIP) process, under which a financially distressed company remains under the control of its directors, but subject to the supervision of a licensed insolvency practitioner who acts as a monitor. The moratorium takes effect upon the filing of an application to the court by the company and lasts for 30 days (capable of extension by the court for a further 30 days or more).
To obtain a pre-insolvency moratorium, directors must include in the application to the court a statement from the monitor which indicates the moratorium has a reasonable prospect of achieving its aims (i.e. the potential for the distressed company to achieve a rescue outcome, whether through new investment, the development of a restructuring plan or otherwise) and that the company has sufficient funds available to it during the moratorium to continue to carry on its business. During the period of the moratorium, creditors are prevented from commencing insolvency proceedings against the company and, absent court consent, cannot enforce any security, commence or continue legal action or exercise rights of forfeiture against the company or its assets.
Provision for an enforcement moratorium while a rescue attempt is investigated is recommended by the World Bank in its Principles for Effective Insolvency and Creditor-Debtor Regimes (ICR Principles). Pre-insolvency moratoria have been a key feature of insolvency reforms made in a number of advanced economies since the COVID-19 pandemic, including in the United Kingdom under the Part A1 moratorium in the Insolvency Act 1986. The Part A1 moratorium – as in Kenya, overseen by a monitor – invokes a broad-based stay on creditors’ enforcement rights to enable a company in financial distress to organise its affairs with a view to pursuing a viable rescue attempt, whether under a restructuring plan (a separate rescue process under Part 26A of the Companies Act 2006) or otherwise.
A pre-insolvency moratorium is an important means for building a rescue culture. It encourages early engagement among distressed but viable debtors, with the opportunity to avert a liquidation outcome while there is still a prospect of the company or its business trading out of its difficulties and restructuring its debts. It also encourages creditor cooperation and collectivism by breaking the automatic entitlement – and often presumptive outcome in the Sub-Saharan African experience to date – to initiate a liquidation scenario. The breathing space available to the distressed debtor is also an opportunity for creditors to realise the benefit that may be obtained from a cooperative approach under a restructuring plan that may achieve a better outcome for creditors collectively than a piecemeal liquidation.
The Kenyan pre-insolvency moratorium process could therefore, in time, give greater impetus towards the development of a positive rescue culture in the country, and a means for overcoming the stigma of insolvency. This process also has the potential to serve as a valuable model for other Sub-Saharan African nations in their own future insolvency reform process.
In Ethiopia, the Commercial Code of 1960 was substantially updated via the enactment of a replacement Commercial Code of Ethiopia 2021 (New Code). Book III of the New Code (titled “Preventive Restructuring, Reorganisation and Bankruptcy Law”) now provides for three different insolvency proceedings: preventive restructuring, reorganisation and bankruptcy (which is a standard liquidation process).
The objective of preventive restructuring is to ensure that, with the unanimous consent of affected creditors, viable debtors in financial difficulties can contractually restructure their debt at an early stage and continue operating, or prepare for the sale of the business as a going concern. For reorganisation proceedings, the consent of a qualified majority of affected creditors is sought to either restructure the debtor’s financial affairs under a restructuring plan, or to otherwise conduct the sale of the debtor’s business as a going concern for the benefit of creditors.
Significantly, the New Code also introduced a special proceeding for small and medium enterprises, replacing the former “summary procedure”. While not a rescue process, this enables the opening of simplified bankruptcy proceedings for companies which cease payments, provided that:
- the asset value in the balance sheet for the last 12 months is less than 20 million Ethiopian Birr;
- the last 12 months of turnover is less than 5million Ethiopian; or
- the total number of employees is less than 10.
In Uganda, the Insolvency Act of 2011 (amended in 2022) consolidated the country’s insolvency laws as the Insolvency Act in Chapter 108 of the Laws of Uganda Revised Edition. The Insolvency Act now provides for company arrangements and administration alongside the processes traditionally used by creditors in the event of financial distress, liquidation and receivership.
Additionally, the Companies Act 2012 (also amended in 2022), which appears as Chapter 106 in Volume 5 of Uganda’s Revised Red Volumes, provides for court-sanctioned compromises or arrangements with creditors as an alternative that can be pursued outside formal insolvency proceedings.
In Nigeria, the Companies and Allied Matters Act 2020 repealed and replaced the previous law which had applied for 30 years. It introduced two corporate rescue measures for the first time in Nigeria: company voluntary arrangements (CVAs) and administration.
Under Chapter 17 of the Act, a CVA is a debtor-led agreement with creditors, supervised by a nominee. The nominee reviews the debtor’s plan and, if satisfied with its terms, can seek a court order to convene a meeting of creditors (and shareholders if they are also impacted by the proposed plan). The plan is deemed to be approved if supported by 75% in value of voting creditors (and shareholders if required), in which case it becomes binding on all unsecured creditors but not secured creditors unless they consent. While having the benefit of being a principally out of court process, the invocation of a CVA is not accompanied by an enforcement moratorium, which can limit the potential for genuine and productive creditor negotiations.
The Nigerian administration process, under Chapter 18 of the Act, is consistent with the usual form of administration familiar in many jurisdictions: the appointment of an external administrator, the application of an enforcement moratorium, the development of a plan to put to creditors for approval and the goal of either rescuing the company as a going concern or at least achieving better returns to creditors than an immediate liquidation.
Apart from these improvements in restructuring frameworks, there have also been broader advances to drive convergence and consistency in insolvency laws in the OHADA region.
OHADA, the French acronym for “The Organisation for the Harmonisation of Business Law in Africa”, was founded on 17 October 1993 under the Port Louis (Mauritius) Treaty. OHADA now comprises 17 mostly Francophone West and Central African nations,[12] whose purpose is to harmonise business law.
These states have established a cross-border regime of uniform laws regulating commercial and company law, secured transactions, arbitration and insolvency law (among other areas), which are immediately applicable in the 17 OHADA member states and prevail over national laws in the event of inconsistency.
The World Bank’s International Finance Corporation provided technical support and capacity building assistance to OHADA in establishing the uniform law framework, which has become an important foundation in the business environment in OHADA member states.
With respect to the insolvency framework, OHADA adopted the Uniform Act Organising Collective Proceedings for the Clearing of Debts (Insolvency Uniform Act) with effect from 24 December 2015. In addition to business rescue proceedings (redressement judiciaire) and liquidation proceedings (liquidation des biens), the Insolvency Uniform Act also provides for two novel alternatives designed to avoid insolvency in the first place: conciliation and preventive settlement (règlement préventif).
Conciliation can be initiated by a court petition filed by the debtor, either alone or with one or more creditors, describing its financial difficulties (with supporting financial records) and the measures proposed to resolve those difficulties. If the petition is successful, the court appoints an independent conciliator, who, over a maximum 3-month period, seeks to facilitate an amicable agreement between the debtor and primary creditors to resolve the debtor’s difficulties. The court has the ability to defer debt payments during the conciliation process.
Preventive settlement is available to debtors experiencing "serious financial or economic difficulties". The process can, again, be initiated by the debtor filing a court petition either alone or with one or more creditors. The petition must be accompanied by a draft preventive settlement agreement (concordat préventif) to be entered into by the debtor and its creditors. If the petition is successful, the court appoints an expert to report on the financial and economic situation of the debtor and the prospects of recovery, and a 3-month enforcement moratorium comes into effect.
The expert then works with the debtor and creditors to devise a final preventive settlement agreement, which must be sanctioned by the court. If the sanction is provided, both secured and unsecured creditors are bound by the terms of the agreement.
Apart from these two preventive measures, the Insolvency Uniform Act also introduced simplified insolvency proceedings for small enterprises.
Small enterprises are defined as sole proprietorships, partnerships or other non-public legal entities with 20 or fewer employees and turnover not exceeding 50 million West African CFA francs. The simplified process is a DIP model, which enables the debtor to remain in control of its affairs, while working with an appointed trustee to develop and file a judicial composition (the functional equivalent of a restructuring plan) within 45 days for approval by both a majority of creditors and the court.
The experience in practice: substantive and ecosystem limitations
The new rescue-oriented reforms across a number of Sub-Saharan African nations have been a welcome and positive step forward. The pre-insolvency moratorium in Kenya and the preventive insolvency measures adopted by OHADA member states are especially progressive, and in time can provide the basis for the development of a genuine collectivist culture among creditors, where negotiated restructuring outcomes are the norm – not the exception – for distressed but viable entities.
However, there are a number of substantive limitations of the new rescue alternatives. Of particular note, the enforcement moratoria that apply are limited in scope. There is no moratorium available to a debtor while it attempts to negotiate a scheme or compromise other than in OHADA member states, and an automatic enforcement moratorium is also lacking under Nigeria’s CVA. This significantly limits the prospect of achieving a negotiated debt restructuring, given the still prevalent tendency for creditors to enforce their strict rights upon the debtor’s default, rather than await negotiations that could see a better return for all creditors collectively under a restructured enterprise. A broader enforcement moratorium can give impetus towards the achievement of creditor consensus and proactive, early negotiations – and critically, to give a distressed debtor the breathing room it needs to prevent the dissipation of capital as it works to develop a restructuring plan to put to creditors.
Further, no Sub-Saharan African jurisdiction has yet adopted the more flexible restructuring tools that can assist in the implementation of a restructuring plan – such as a cross-class cram down if a scheme or compromise is not approved by the required majority across all voting classes (subject to fairness protections for creditors) – which are key features of the post-pandemic reforms introduced in advanced economies such as the United Kingdom, the Netherlands and throughout the European Union. These measures can often be the “make or break” in achieving a successful restructuring outcome and can prevent single classes of creditors – including out-of-the-money creditors that would receive little, if any, return in a liquidation scenario – from derailing a rescue attempt that would be in the best interests of creditors as a whole, and provide a pathway for the debtor or its business to continue.
There are also no provisions for DIP finance in the insolvency regimes of Sub-Saharan African nations. DIP finance provisions – including an option for a priming lien to be granted to a creditor advancing new funding in the course of a rescue attempt – are features of the reorganisation processes in jurisdictions such as Singapore and the United States. They can be an important means for incentivising the provision of critical working capital to distressed debtors when existing lenders, particularly traditional bank lenders, are often reluctant to increase their exposure.
The absence of new funding will often mean a restructure cannot proceed, even where the debtor has reasonable prospects of being revived. Incentives for distressed debt finance may prove particularly valuable in many Sub-Saharan African jurisdictions, given the difficulties that can be encountered in securing finance even outside a distressed scenario, and the fundamental need to actively drive a move away from a liquidation-dominant focus among creditors that has been entrenched for so many decades.
Some practitioners have also highlighted a disconnect between the legal process of business rescue and the practical realities of turning a business around – with rescue plans often falling short of addressing the strategic and operational shifts needed for lasting viability. [13] This may also reflect the limited awareness and understanding of what the new rescue processes entail and limited financial and insolvency experience among both debtors and advisors in the region.
Perhaps of greater concern, there has been a high level of scepticism about the rescue alternatives among debtors, which are not well-understood or utilised, and the rescue culture the reforms were designed to achieve has not been reflected in practice. As noted in a recent study undertaken as part of an INSOL International technical report:
"Formal rescue is still read as failure, so boards try informal fixes until cash is gone, then file at the cliff edge. Creditors approach proposals with suspicion rather than value analysis, which depresses constructive engagement and narrows the feasibility window that a moratorium can realistically protect." [14]
Many of these themes were discussed at the recent Africa Round Table (ART), jointly hosted by INSOL International and the World Bank in Cape Town, South Africa from 20-21 November 2025. ART is a forum which brings together a broad range of practitioners, regulators, members of the judiciary, policymakers, international bodies and regional institutions with the goal of advancing a coordinated approach to insolvency law reform and capacity-building in Sub-Saharan Africa.
ART has been a tremendous success since its inception in February 2010 and has helped to elevate insolvency reform on the African policy agenda through shared experiences, learning and understanding. This has been important in demonstrating to legislators and regulators the critical link and direct correlation between modern, efficient insolvency laws and economic performance.
In Cape Town, particular attention was drawn to the still nascent rescue culture in the region, with a need for greater flexibility in formal insolvency processes, the development of creditor collectivism and out-of-court restructuring mechanisms, and further institutional and capacity building efforts across the insolvency profession and the judiciary to improve the effective administration of insolvency laws.
Apart from substantive limitations of the insolvency reforms in the region to date, and the lack of awareness, understanding and actual use of the new rescue alternatives that have been introduced, there is also a more fundamental issue: whether the alternatives are really “fit for purpose” in light of the unique business dynamics in the region.
In that regard, as noted, MSEs comprise the overwhelming majority of Sub-Saharan African businesses. Formal “traditional” rescue processes of the kind that have been introduced so far in the region typically involve significant costs, potential delays and a level of complexity which can make them prohibitive for smaller businesses.
It is essential for an insolvency system to be adapted to local conditions, and to be well-understood and capable of use by the very businesses that need to resort to it the most. Otherwise, an “insolvency law” exists in name only and the economic benefit that an efficient insolvency system can provide will remain a mere theoretical prospect.
To date, simplified MSE insolvency systems have only been introduced for OHADA member states and in Ethiopia. However, the early experience has been that these processes are infrequently used, in part due to the stigma associated with insolvency among both debtors and creditors. [15] Further, in Ethiopia, the simplified process provides access to bankruptcy alone, and is not a rescue pathway. In Rwanda, a draft law on simplified insolvency for MSEs was introduced before the Parliament in October 2024, but is yet to be passed.
In the next section of this article, it is suggested that MSE insolvency systems – along with public education and awareness and institutional support – ought to feature as the priority focus points for future insolvency reforms in Sub-Saharan Africa to reach the level of sustainable growth, improvements in living standards and jobs security the region aspires to achieve.
Future Insolvency Reform Priorities in the Region
Simplified MSE insolvency alternatives
While there are many components capable of forming part of Sub-Saharan Africa’s future insolvency reform pathway, the immediate focus ought to be on simplified restructuring and liquidation options for MSEs – catering to the specific needs of these businesses, and avoiding the significant cost, complexities and court delays that have been so pronounced under the existing formal insolvency options in the region.
Given the primary contribution that MSEs make to the regional economy, and the manner in which they serve as “engine rooms” for jobs growth, innovation and improvements in equality and the standard of living, it is critical for Sub-Saharan African nations to have in place simple and accessible MSE insolvency options. In time, these processes can indeed become part of the economic, financial and social fabric of Sub-Saharan Africa.
The introduction of distinct MSE insolvency alternatives as part of a best-practice insolvency system is recommended by the World Bank in the ICR Principles and by UNCITRAL in its Legislative Guide on Insolvency Law for Micro and Small Enterprises (UNCITRAL MSE Guide), adopted at its 54th Session in 2021 as Part V of the UNCITRAL Legislative Guide on Insolvency Law.
So why is the position of MSEs so unique? Some of their typical characteristics and challenges include simple organisational structures, often rudimentary financial and governance structures, almost exclusive dependence on bank finance for working capital requirements and the limited financial literacy of business owners. Further, in circumstances of financial distress, because ownership and management are usually one and the same in small companies, it has been noted that directors:
"Will have incentives to "gamble for resurrection" or keep the company alive – even if it is not viable – to see if the company's situation improves at some point in the future …
In other cases, however, the decision to keep a firm alive can also be led by emotional and behavioural factors. These factors can include attachment to the business or cognitive biases such as over-optimism or those leading to remain married to their original choices even when it is no longer rational to do so." [16]
This can cause the continuation of trade for clearly unviable businesses, which is not only harmful to creditors, but also inhibits efficiency in the economy as capital cannot be recycled into more profitable ventures.
Further, as the World Bank notes, the significant expense and delays of traditional insolvency systems are a major deterrent for MSEs, which simply lack the resources to cover basic costs and fees, as well as obtaining essential legal and financial advice. [17] Accessing new finance is also problematic, due to MSEs’ limited balance sheet, small size and unequal bargaining power. [18]
What might MSE insolvency alternatives look like for Sub-Saharan African nations?
MSE-focused restructuring and liquidation options have now been introduced in a growing number of jurisdictions since the COVID-19 pandemic, such as the United States, Australia, Myanmar, Singapore, India, Spain and Chile. There are a number of broadly consistent features of these processes, which generally reflect the UNCITRAL MSE Guide and the ICR Principles, including:
- the definition of “MSE” with reference to specific minimum thresholds (such as total outstanding liabilities, assets, turnover and/or employee numbers);
- early access, so that the debtor is able to pursue a potential reorganisation if it is in financial distress, without needing to be technically insolvent;
- the use of a DIP model, under which existing management remains in control of business but must appoint a monitor or restructuring advisor;
- an enforcement moratorium to give the debtor breathing room to develop a restructuring plan with the monitor or advisor (with very limited exceptions where required to ensure creditor protections);
- provisions for a restructuring plan to be put to a vote of creditors, with supporting measures to simplify voting procedures, and deemed approval if a creditor does not lodge an objection within a specific time period (designed to prevent creditor hold-outs impeding the process);
- tight timeframes, generally in the 5-6 week range, designed to reduce costs and delays, enhance efficiency, control potential debtor abuse and ensure balanced protection for creditors, who should not be expected to have their rights suspended indefinitely where a restructuring is not viable; and
- if a restructuring is not possible, a straightforward conversion process to liquidation – designed to promote the quick, simple exit of unviable entities with minimal costs and procedural burdens.
Public education and awareness and institutional support
Yet, given the difficulties experienced in Sub-Saharan Africa to date in generating awareness and uptake of formal insolvency options among debtors, it is important for the introduction of MSE insolvency options to be accompanied by government and industry-supported public education and awareness campaigns and supporting institutional initiatives.
These measures should focus on generating awareness and understanding among debtors of the insolvency options available to them and the futility in simply trading on when the business is not viable. A key message should be that “insolvency” is not inherently bad – it is a normal part of a healthy economy and it does not always spell the end. Rather, if they act early enough, business owners may be able to save the business, and continue their operations and legacy in the community. This can begin to break down the stigma and shame associated with the insolvency systems in Sub-Saharan African nations, and is central to building a constructive, proactive approach from MSEs in managing financial distress at an early stage.
The success that proactive public education and awareness can have in overcoming the stigma of insolvency in EMDEs, and developing a stronger rescue culture, has been highlighted by Professor Gurrea-Martinez, with reference to Chile’s consistent public education measures for debtors. Professor Gurrea-Martinez notes:
"Chile demonstrates that insolvency stigma is not an intrinsic problem associated with certain cultures or countries. Instead, it is a problem that, with the right policies and institutional reforms, can be tackled – and in a short period of time." [14]
The Business Recovery and Insolvency Practitioners Association of Nigeria (BRIPAN) has also recently announced it will intensify efforts to raise public awareness on business restructuring and insolvency practices available under the Companies and Allied Matters Act 2020. The focus will be on demonstrating to debtors that insolvency can be a way to save, not terminate, a struggling business, and also working with banks to explain the value of business rescue tools and the benefit in allowing a distressed debtor to recover before enforcing any strict enforcement rights. [20] This is a very positive development, and it is hoped that other nations will follow Nigeria’s lead in proactively seeking to overcome entrenched insolvency stigma.
These education initiatives focused on the availability and benefit of insolvency alternatives in the event of distress should also ideally be combined with broader financial literacy training, and access to early warning tools to help distressed debtors diagnose insolvency risk factors early on, with a view to avoiding insolvency in the first place.
As the World Bank has identified, early warning tools help to detect a debtor’s financial difficulties so they can be addressed proactively.[21] By catching the debtor’s actual or impending financial distress at the earliest possible time, these tools allow the debtor time to seek to resolve its difficulties before they become insurmountable.
Early warning tools typically consist of an alert to a debtor when certain financial criteria exist (e.g. the late payment of creditors, cash flow difficulties, trading losses, incomplete financial records, the inability to obtain new funding, a circumstance of default and/or high staff turnover). These tools can be hosted on government or regulator websites, with debtors encouraged to input their own information confidentially, and “self-diagnose” their financial health.
State support for debt counselling for distressed debtors would further assist in encouraging a proactive approach to debt management, with a view to averting insolvency or otherwise assisting a debtor to navigate the process for initiating insolvency proceedings and pursuing negotiations with creditors. Debt counselling and financial education are specifically recommended in the UNCITRAL MSE Guide, which provides:
"Many insolvency reforms aimed at lowering barriers for access to insolvency by MSEs are complemented by other institutional support to MSEs, debt counselling, mediation services and assistance with application for commencement of insolvency proceedings and compliance with disclosure obligations under insolvency law." [22]
Further, in recognising the need for any successful reform process to be adapted to local market conditions and the specific social, economic and cultural issues encountered by a particular jurisdiction, education and training in insolvency and financial matters could also be supplemented with corporate governance training for MSEs.
Why governance? Because, in addition to MSEs contributing to the substantial majority of growth and jobs in Africa, the overwhelming majority of those businesses are family-owned. Most estimates suggest that family enterprises constitute up to 80-90% of all businesses in Africa, and up to 85% of GDP, similar to other EMDEs. [23]
And yet the experience has been that as few as 20% survive beyond the second generation – primarily due to governance failures such as informal decision-making, founder dependence and lack of succession planning. [24] It has been estimated that only 77% of African family businesses have some kind of governance structure in place. [25]
Governance training could focus on a number of key areas, including the importance of:
- family constitutions and agreements which set out the family’s shared vision, mission, values and goals, along with decision-making processes and dispute resolution rules;
- setting up a family council as a forum for family members to discuss matters related to the business and fostering open communication and positive relationships;
- creating robust policies as a set of rules that everyone agrees to follow, ensuring fairness and transparency; and
- effective succession planning, due to the frequent reluctance among founders to hand over control to future generations, or to alternatively select successors based on family values rather than capability. Ultimately, the failure to plan is a plan to fail.
Governance training – as a means for improving financial management and reducing the risk of insolvency – is already being actively explored in other regions, such as the Middle East and North Africa. [26]
Going forward
Collectively, these measures would represent a key “first win” in progressing further insolvency reforms in Sub-Saharan Africa – and critically, in helping to ensure that insolvency alternatives are actually used by the businesses that need them the most in the region.
Over time, efforts should also continue to improve the insolvency ecosystem through capacity building measures such as specialised insolvency courts and the development of an institutionalised, regulated and highly functioning insolvency profession. Indeed, improvements in the business and credit environment and the realisation of the economic and financial gains to be made from the implementation of modern insolvency laws ultimately depend on the effective administration of those laws.
In that regard, it has been pleasing to see the recent innovations being led in South Africa and Nigeria. On 14 April 2025, the Johannesburg Division of the High Court officially launched a pilot Dedicated Insolvency Court to exclusively manage insolvency matters. The intention is to overcome the inefficiencies and delays that have impeded effective rescue outcomes in the past for distressed entities. Similarly, in March 2025, the Nigerian Federal High Court set up a specialised Insolvency Unit. The Unit was established to supervise all corporate reorganisation and winding up processes under the Companies and Allied Matters Act 2020, with a view to streamlining processes and implementing faster, more transparent and expert-led insolvency proceedings.
This is indicative of the appetite for reform in the region, and the progressive role many Sub-Saharan African nations can take in elevating improvements in the insolvency framework on the regulatory agenda as a central means of achieving the region’s vision for growth and prosperity.
Conclusion
The pace of economic transformation in Sub-Saharan Africa has been remarkable over the last decade. Growth has continued to be resilient notwithstanding the challenges of COVID-19 pandemic, inflationary pressures, currency devaluations, high interest rates and instability in global trading markets.
As the African Development Bank has emphasised, if African nations can effectively mobilise and efficiently use their abundant capital potential and resources and put in place effective legal, regulatory and governance frameworks, then Africa can become “a continent of transformed potential”. [27]
However, sustainable growth, improvements in living standards and the development of a dynamic, entrepreneurial economy that provides jobs for a rapidly expanding working age population are highly dependent on effective insolvency laws.
Well-designed insolvency laws are not just about what happens when a business fails. Rather, they have a significant impact on the beginning – enhancing innovation, productivity, jobs creation and an active investment market, with greater access to credit especially for MSEs in need of working capital for business expansion.
While a number of nations in Sub-Saharan Africa have introduced formal rescue alternatives over the last decade – seeking to encourage a move away from traditionally liquidation-focused outcomes for distressed entities in the region – the rescue culture remains nascent and empirical evidence suggests these rescue alternatives are infrequently used due to excessive costs, inefficiencies, delays and the continued stigma of bankruptcy.
While the scope for future reforms in the region is broad, it is suggested that the immediate focus should be on the introduction of simplified rescue and liquidation alternatives for MSEs, as well as public education and awareness measures designed to enhance business owners’ understanding of the benefit of these alternatives, and to improve financial literacy and corporate governance. Measures such as access to early warning tools to assist MSEs diagnose financial distress at an early stage and debt counselling can also help to provide important institutional support to MSEs with a view to reducing bankruptcy stigma and cultivating genuine rescue-focused insolvency systems in the region.
Once embedded, these reforms could lay the foundation for further substantive insolvency reforms over time and broader insolvency ecosystem improvements. Collectively, these measures can provide a provide a pathway towards the achievement of sustainable economic growth and jobs creation in the Sub-Saharan Africa region, and may indeed see the insolvency systems in the region become reverse models for advanced nations on what an efficient and effective insolvency system can look like.
***
[1] This is the region on the African continent lying to the south of the Sahara. It includes the sub-regions of Central Africa, East Africa, Southern Africa and West Africa and collectively (based on the World Bank’s definition) consists of 48 individual countries. North Africa (consisting of Algeria, Egypt, Libya, Morocco, Sudan, Tunisia and Western Sahara)) falls outside Sub-Saharan Africa and is instead grouped within the MENA (Middle East and North Africa) region as part of the Arab world.
[2] IMF, Regional Economic Outlook: Sub-Saharan Africa, October 2025.
[3] World Bank Group, Africa’s Pulse: An Analysis of Issues Shaping Africa’s Economic Future, October 2025.
[4] African Development Bank Group, African Economic Outlook 2025: Making Africa’s Capital Work Better for Africa’s Development, May 2025.
[5] World Economic Forum, “Why Africa’s SMEs Need More Than Money to Ensure Their Growth”, 14 July 2023, available at: https://www.weforum.org/stories/2023/07/why-priming-africa-s-smes-for-growth-is-about-more-than-money/
[6] African Union, “Strategy for SME Development in Africa”, 2019, available at: https://au.int/sites/default/files/documents/44950-doc-AU_SME_Strategy.pdf?utm_source=hootsuite&utm_medium=&utm_term=&utm_content=&utm_campaign=
[7] World Bank Group, Principles for Effective Insolvency and Creditor/Debtor Regimes, Revised Edition, April 2021, 7.
[8] Australian Institute of Company Directors, Submission to the Parliamentary Joint Committee on Corporations and Financial Services, Inquiry into the Effectiveness of Australia’s Corporate Insolvency Laws, July 2023.
[9] Muge Adalet McGowan and Dan Andrews, “The Design of Insolvency Regimes Across Countries”, OECD Economics Department Working Papers, No 1504, September 2018.
[10] Aurelio Gurrea-Martinez, Reinventing Insolvency Law in Emerging Economies (2024, Cambridge University Press).
[11] Andres F Martinez, Aurelio Gurrea-Martinez and Harish Natarajan, World Bank Group, “The Crucial Role of Insolvency Law in Job Creation and Preservation”, 1 July 2025, available at: https://blogs.worldbank.org/en/psd/the-crucial-role-of-insolvency-law-in-job-creation-and-preservat#:~:text=A%20key%20function%20of%20insolvency,otherwise%20be%20lost%20in%20liquidation.
[12] Benin, Burkina Faso, Cameroon, Central African Republic, Chad, Comoros, Republic of the Congo, Côte d'Ivoire, Equatorial Guinea, Gabon, Guinea, Guinea-Bissau, Mali, Niger, Senegal, Togo and Democratic Republic of the Congo.
[13] “Bankruptcy and Restructuring: Worldwatch”, Financier Worldwide, December 2025, available at: https://www.financierworldwide.com/worldwatch-bankruptcy-restructuring.
[14] Emily Onyango, Paul Winyi Kasami, Agatha Chikodi McMadu and Lance Schapiro, “The Efficacy of Formal Turnaround Processes in Kenya, Uganda, Nigeria and South Africa”, INSOL International Technical Paper No 77, October 2025.
[15] See, for the OHADA experience: World Bank Group, International Finance Corporation, An Impact Assessment of OHADA Reforms, 2018.
[16] Aurelio Gurrea-Martinez, Reinventing Insolvency Law in Emerging Economies (2024, Cambridge University Press).
[17] World Bank Group, ICR Principles, 2021, iv.
[18] Aurelio Gurrea-Martinez, “Implementing an Insolvency Framework for Micro and Small Firms” (2021) 30 International Insolvency Review S46.
[19] Aurelio Gurrea-Martinez, “Insolvency Law in the Global South: Lessons for the Global North”, Law Working Paper No 838/2025, April 2025, Singapore Management University and European Corporate Governance Institute.
[20] Abubakar Ibrahim, “BRIPAN Moves to Deepen Awareness on Business Recovery, Insolvency in Nigeria”, Business Day, 23 September 2025, available at: https://businessday.ng/business-economy/article/bripan-moves-to-deepen-awareness-on-business-recovery-insolvency-in-nigeria/
[21] World Bank, Finance for an Equitable Recovery: World Development Report 2022, October 2022, 132.
[22] UNCITRAL, Commentary to the UNCITRAL Legislative Recommendations on the Insolvency of Micro and Small Enterprises, [24].
[23] Johnson Oluwatobi Okeniyi, Sunday Eneojo Samuel, Chimkwanum Okecha and Samesa Igirigi, “Exploring the Pillars of Sustainable Development in the Context of Ghanaian SMEs” (2020) 11(14) Journal of Economics and Sustainable Development. https://www.bcg.com/publications/2016/what-makes-family-businesses-in-emerging-markets-so-different
[24] Oikocredit, “Supporting Family Businesses for the Future: Succession and Governance in East Africa’s SMEs”, 1 July 2025, available at: https://www.oikocredit.org/news/supporting-family-businesses-for-the-future-succession-and-governance-in-east-africas-smes/
[25] PwC, Africa Family Business Survey 2023, 18 May 2023, available at: https://www.pwc.co.za/en/publications/family-business-survey.html.
[26] Sanaa Abouzaid, “Good Governance Holds the Key for Family Businesses”, Ethical Boardroom, available at: https://www.ifc.org/content/dam/ifc/doc/mgrt/good-cg-holds-key-for-family-business-sanaa-abouzaid.pdf
[27] African Development Bank Group, African Economic Outlook 2025: Making Africa’s Capital Work Better for Africa’s Development, May 2025.
