“Banks no longer support us.” This recurring sentiment from local entrepreneurs involved in public procurement in Togo highlights a significant challenge for the nation’s private sector. Small and Medium-sized Enterprises (SMEs) and state contractors report increasingly stringent conditions for obtaining bank credits and pre-financing, which in turn slows down the execution of numerous infrastructure projects and public contracts.

The spiral of unsettled debts

At the core of financial institutions’ reluctance lies a systemic issue: the accumulation of unpaid debts stemming from the execution of public contracts. To carry out work commissioned by public administrations, businesses heavily rely on bank loans. However, when payment delays occur at the treasury or within public entities, the repayment chain breaks down, leaving companies unable to honor their commitments to banks on time.

Dr. LANDOZI Saharou’s analysis: “A direct impact on bank profitability”

In an analysis, Dr. LANDOZI Saharou, an expert in corporate finance and economics, sheds light on the banking mechanisms currently hindering access to credit:

• “When a public contract experiences payment delays, the associated bank credit progressively deteriorates, eventually categorizing as a doubtful or non-performing loan (NPL). In compliance with the prudential requirements set by the Central Bank of West African States (BCEAO), the bank is then compelled to tie up its equity by setting aside substantial provisions. This constraint significantly reduces its liquidity and its capacity to grant new financing.”

This phenomenon has been reflected in the sector’s overall performance: Togo’s financial market registered cumulative net losses at the close of 2025 within the West African Economic and Monetary Union (UMOA) zone, largely due to the burden of provisions mandated to cover non-performing loans linked to public procurement projects.

On the ground, construction and public works (BTP) SME managers describe daily operational gridlock:

• “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 lines as soon as a payment falls behind schedule. We act as a buffer, absorbing cash flow shocks with our own funds, which depletes our working capital.”
• “Banks now demand real guarantees that are almost impossible for simple market pre-financing. Without a public guarantee or endorsement mechanism, small local businesses can no longer compete against larger groups.”

Recommendations: moving towards equitable risk sharing

In response to this stalemate, Dr. LANDOZI Saharou and several financial experts advocate for a re-evaluation of public procurement governance, proposing a model of shared risk:

• Creation of a dedicated guarantee fund: To secure commitments made by SMEs to banks, thereby reducing the rates of provisioning required.
• Utilization of escrow accounts: To ensure the traceability and direct allocation of public payments for the repayment of granted bank loans.
• Securitization of arrears: To transform accumulated public debts into negotiable securities, cleaning up bank balance sheets and freeing up liquidity.

According to Dr. LANDOZI Saharou, implementing these reforms would enable commercial banks to reclaim their role as economic drivers: “remaining profitable while continuing to finance national development and public procurement securely.”