A common lament echoes among local entrepreneurs engaged in public contracts: « The banks no longer support us. » This recurring sentiment underscores a significant hurdle for Togo’s private sector. Small and Medium-sized Enterprises (SMEs) and state contractors report increasingly stringent conditions for securing bank loans and pre-financing, which in turn slows down the progress of numerous infrastructure projects and public works.
The spiral of unsettled claims
At the heart of this financial institutions’ reluctance lies a systemic issue: the mounting backlog of unpaid invoices following the completion of public contracts.
To execute projects commissioned by public administrations, businesses heavily rely on bank borrowing. However, when payment delays occur from the treasury or public entities, the repayment chain breaks. This leaves companies unable to meet their financial obligations to banks on time.
An analysis by Dr. LANDOZI Saharou: « A direct impact on bank profitability »
Dr. LANDOZI Saharou, an expert in corporate finance and economics, has meticulously analyzed the banking mechanisms currently restricting access to credit:
« When a public contract experiences payment delays, the associated bank credit progressively deteriorates, eventually reclassifying as a doubtful or non-performing loan (NPL). In compliance with the prudential requirements set by the Central Bank of West African States (BCEAO), banks are then compelled to tie up significant capital by setting aside substantial provisions. This constraint directly reduces their liquidity and their capacity to extend new financing. »
This phenomenon has visibly impacted 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, primarily due to the heavy burden of provisions mandated to cover non-performing loans linked to public procurement projects.
On the ground, managers of construction and public works (BTP) SMEs describe daily operational paralysis:
- « We find ourselves caught between two demands. On one side, the State insists that work progresses according to specifications. On the other, banks freeze our overdraft facilities as soon as an invoice is delayed. We act as a buffer, absorbing treasury shocks with our own funds, which rapidly depletes our working capital. »
- « Banks now demand almost impossible-to-provide tangible guarantees for simple contract pre-financings. Without a public guarantee or endorsement mechanism, small local enterprises 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 revised governance model for public procurement, one that establishes a framework for shared risk:
- Establish a dedicated guarantee fund: To secure commitments made by SMEs to banks, thereby reducing provisioning rates.
- Utilize escrow accounts: To ensure the traceability and direct allocation of public payments towards the repayment of granted bank loans.
- Securitize arrears: To transform accumulated public debts into negotiable securities, cleansing bank balance sheets and freeing up liquidity.
According to Dr. LANDOZI Saharou, implementing these reforms would enable commercial banks to reclaim their vital role as economic drivers: « remaining profitable while securely continuing to finance national development and public procurement. »
