“Banks are no longer supporting us.” This recurring sentiment from local entrepreneurs involved in public procurement in Togo highlights a significant obstacle for the nation’s private sector. Small and Medium-sized Enterprises (SMEs) and other companies providing services to the State report increasingly stringent conditions for obtaining bank loans and pre-financing. This tightening credit environment is slowing down the execution of numerous essential infrastructure projects and public works.
The spiral of unpaid debts
At the heart of financial institutions’ reluctance lies a systemic issue: the accumulation of outstanding debts resulting from the completion of public contracts.
To carry out projects commissioned by public administrations, businesses heavily rely on bank borrowing. However, when delays in payment occur from the Treasury or other public entities, the repayment chain is disrupted. This leaves companies unable to meet their financial obligations to banks on time.
Expert analysis: direct impact on bank profitability
Dr. LANDOZI Saharou, an expert in corporate finance and economics, has shed light on the banking mechanisms currently restricting access to credit:
“When a public contract experiences payment delays, the associated bank credit progressively deteriorates, eventually categorised as doubtful or non-performing loans (NPLs). In adherence to the prudential requirements set by the Central Bank of West African States (BCEAO), banks are compelled to tie up significant capital by setting aside substantial provisions to cover these risks. This constraint directly reduces their liquidity and, consequently, their capacity to extend new financing.”
This phenomenon has had a clear impact on the sector’s overall performance. The Togolese financial market recorded cumulative net losses at the close of the 2025 fiscal year within the UMOA zone, largely attributed to the burden of provisions mandated for non-performing loans linked to public procurement projects.
On the ground, managers of construction and public works SMEs describe a daily operational deadlock:
- “We find ourselves caught between two pressures. On one side, the State demands that work progresses strictly according to specifications. On the other, banks freeze our overdraft facilities the moment a payment certificate is delayed. We effectively become shock absorbers, using our own funds to cushion treasury shortfalls, which rapidly depletes our working capital.”
- “Banks are now demanding real guarantees that are almost impossible for simple market pre-financings. Without a public guarantee or endorsement mechanism, small local businesses can no longer compete against larger corporations.”
Recommendations: moving towards equitable risk sharing
To overcome this impasse, Dr. LANDOZI Saharou and several financial experts advocate for a comprehensive overhaul of public procurement governance, proposing a model of shared risk:
- Creation of a dedicated guarantee fund: This would secure commitments made by SMEs to banks, thereby reducing the need for high provisioning rates.
- Implementation of escrow accounts: Ensuring transparency and direct allocation of public payments towards the repayment of granted bank loans.
- Securitisation of arrears: Transforming accumulated public debts into negotiable securities to cleanse bank balance sheets and unlock liquidity.
According to Dr. LANDOZI Saharou, implementing these reforms would enable commercial banks to reclaim their vital role as an economic engine: “remaining profitable while continuing to finance national development and public procurement securely.”