Document Type

Case Study


In the late 1980s, Senegal embarked on a comprehensive set of reforms to its banking sector. The reforms comprised changes to management, supervision, and lending standards after loose central bank refinancing standards had let the nonperforming loans (NPLs) caused by drought and public enterprise mismanagement linger on bank balance sheets. In the process, the country attempted to recover NPLs worth hundreds of billions of francs. Senegal closed several state-controlled banks, transferring bad assets and certain liabilities to a new asset management company, the Société Nationale de Recouvrement (SNR). The SNR’s debt recoveries would reimburse depositors in the liquidated banks and service the country’s debt to the regional central bank, which restructured its loans to Senegalese banks. To accomplish this mandate, Loi [Law] 1991-21 granted the asset management company extraordinary powers, such as summary judgment against debtors. The SNR absorbed the balance sheets of seven banks, including approximately CFA 144 billion (US$450 million) in nonperforming loans. The government initially estimated it could recover CFA 32 billion by 1993. It reached this target in 1994, but missed most other recovery goals. The SNR would recover CFA 30 billion more in the following 23 years, for a total recovery rate of 43%. World Bank auditors blamed the SNR’s hesitancy to pursue large, well-connected debtors for its performance.