“Banks no longer support us.” This frequent lament 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 companies providing services to the state report increasingly stringent conditions for obtaining bank credits and pre-financing. This tightening is significantly hindering the progress of numerous infrastructure projects and public contracts across the country.
The spiral of unsettled claims
At the heart of financial institutions’ reluctance lies a systemic issue: the persistent accumulation of unpaid invoices following the completion of public contracts. To undertake work commissioned by public administrations, businesses heavily rely on bank loans. However, when delays in payment occur from the Treasury or other public entities, the repayment chain breaks down. This leaves companies unable to meet their payment deadlines with banks, creating a ripple effect of financial distress.
Dr. Landozi Saharou’s analysis: “A direct impact on bank profitability”
Dr. Landozi Saharou, a corporate finance specialist and economist, has shed light on the banking mechanisms currently restricting access to credit for businesses in Togo. He explains that when a public contract faces 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 then compelled to allocate substantial provisions to cover these risks. This obligation directly reduces their liquidity and capacity to extend new financing, impacting the broader West Africa banking sector.
This phenomenon was evident in the overall performance of Togo’s financial sector, which recorded cumulative net losses at the close of the 2025 fiscal year within the West African Economic and Monetary Union (UMOA) zone. These losses were primarily attributed to the significant provisions mandated to cover non-performing loans linked to public procurement projects.
On the ground, construction and public works (BTP) SME managers describe a daily operational deadlock:
- “We find ourselves caught between two demands. On one side, the state requires work to progress according to specifications. On the other, banks freeze our overdraft facilities as soon as a payment statement is delayed. We act as a buffer, absorbing cash flow shocks with our own funds, which rapidly depletes our working capital.”
- “Banks now demand real guarantees that are almost impossible for us to provide for simple contract pre-financings. Without a public guarantee mechanism or endorsement, small local businesses can no longer compete against larger corporations.”
Recommendations: 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 based on shared risks:
- Creation of a dedicated guarantee fund: This fund would secure commitments made by SMEs to banks, thereby reducing the required provisioning rates for financial institutions.
- Utilization of escrow accounts: Implementing these accounts would ensure the traceability and direct allocation of public payments towards the repayment of granted bank loans.
- Securitization of arrears: Transforming accumulated public debts into negotiable securities would help clean up bank balance sheets and unlock much-needed liquidity.
According to Dr. Landozi Saharou, implementing these reforms would enable commercial banks in Togo to reclaim their vital role as economic drivers. It would allow them to “remain profitable while securely continuing to finance national development and public procurement initiatives.”
