A growing sentiment among local entrepreneurs engaged in public procurement in Togo is that financial institutions are no longer supporting them. This recurring complaint highlights a significant hurdle for the private sector, particularly for small and medium-sized enterprises (SMEs) and state contractors. They report increasingly stringent conditions for obtaining bank credits and pre-financing, which is notably slowing down the execution of numerous infrastructure projects and public works.
The spiral of unpaid debts
At the heart of this reluctance from financial institutions lies a fundamental issue: the accumulation of unpaid debts stemming from executed public contracts.
To carry out projects commissioned by public administrations, companies heavily rely on bank loans. However, when the Treasury or public entities delay payments, the repayment chain breaks. This leaves businesses unable to meet their loan obligations to banks on schedule.
Dr. Landozi Saharou’s analysis: “A direct impact on bank profitability”
Dr. LANDOZI Saharou, a corporate finance specialist and economist, has analyzed the banking mechanisms currently restricting access to credit. He explains:
“When a public contract faces payment delays, the associated bank credit progressively deteriorates, eventually falling into the category of doubtful or non-performing loans (NPLs). In compliance with the prudential requirements of the Banque Centrale des États de l’Afrique de l’Ouest (BCEAO), banks are then compelled to tie up their equity by setting aside substantial provisions. This constraint significantly reduces their liquidity and their capacity to grant new financing.”
This phenomenon has had a noticeable impact on the sector’s overall performance. The Togolese financial market recorded cumulative net losses at the end of the 2025 fiscal year within the UMOA zone, largely due to the weight of provisions required to cover non-performing loans linked to public procurement projects.
On the ground, managers of construction and public works (BTP) SMEs describe daily operational challenges:
- “We find ourselves caught between two demands. On one hand, the state requires work to progress according to specifications. On the other, banks freeze our overdraft lines as soon as a payment falls behind. We act as a buffer, absorbing cash flow shocks with our own funds, which 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 groups.”
Recommendations: towards equitable risk sharing
To overcome this deadlock, Dr. LANDOZI Saharou and several financial experts advocate for a re-evaluation of public procurement governance, proposing a risk-sharing model:
- Creation of a dedicated guarantee fund: This would secure commitments made by SMEs to banks, thereby reducing the need for high provisioning rates.
- Utilization of escrow accounts: Ensuring traceability and direct allocation of public payments to the repayment of granted bank loans.
- Securitization of arrears: Transforming accumulated public debts into negotiable securities to clean up bank balance sheets and release liquidity.
According to Dr. LANDOZI Saharou, implementing these reforms would enable commercial banks to reclaim their vital role as economic drivers: “to remain profitable while securely continuing to finance national development and public procurement.”
