“Banks are no longer supporting us.” This recurring lament from local entrepreneurs engaged in public procurement paints a stark picture of the constraints facing Togo’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 situation is significantly slowing down the progress of numerous infrastructure projects and public works contracts.
The spiral of unsettled claims
At the heart of financial institutions’ reluctance lies a systemic issue: the accumulation of unpaid debts following the execution of public contracts. To undertake projects commissioned by public administrations, businesses heavily rely on bank borrowing. However, when delays in payment occur from the treasury or public entities, the repayment chain breaks. This leaves companies unable to meet their bank deadlines, creating a ripple effect across the economy.
Dr. LANDOZI Saharou’s analysis: “A direct impact on bank profitability”
In a detailed analysis, Dr. LANDOZI Saharou, a corporate finance specialist and economist, shed light on the banking mechanisms currently restricting access to credit. He explained: “When a public contract experiences payment delays, the associated bank credit progressively deteriorates, eventually reclassifying as a doubtful or non-performing loan (NPL). In adherence to the prudential requirements of the Central Bank of West African States (BCEAO), the bank is then compelled to immobilize significant equity by setting aside substantial provisions. This obligation reduces the bank’s liquidity and its capacity to extend new financing.”
This phenomenon has visibly impacted the entire financial sector. Togo’s financial market recorded cumulative net losses at the close of the 2025 fiscal year within the UEMOA zone. These losses were primarily attributable to the substantial provisions mandated to cover non-performing loans linked to public procurement projects.
On the ground, managers of construction SMEs describe daily operational paralysis:
- “We find ourselves caught between a rock and a hard place. On one side, the State demands that work progresses according to specifications. On the other, banks freeze our overdraft facilities the moment an invoice is delayed. We act as a buffer, absorbing cash flow shocks with our own funds, which rapidly depletes our working capital.”
- “Banks are now demanding real collateral that is almost impossible for small businesses to provide for simple project pre-financing. Without public endorsement or guarantee mechanisms, local small enterprises can no longer compete against larger groups.”
Recommendations: moving towards equitable risk sharing
In response to this deadlock, Dr. LANDOZI Saharou and several financial experts advocate for a comprehensive overhaul of public procurement governance, proposing a model that incorporates shared risks:
- Creation of a dedicated guarantee fund: This would secure commitments made by SMEs to banks, thereby reducing the required provisioning rates.
- Utilization of escrow accounts: Ensuring transparency and direct allocation of public payments towards the repayment of granted bank loans.
- Securitization of arrears: Transforming accumulated public debts into negotiable securities to clean up bank balance sheets and unlock liquidity.
According to Dr. LANDOZI Saharou, implementing these reforms would enable commercial banks to reclaim their essential role as economic drivers: “remaining profitable while continuing to securely finance national development and public procurement.”