Togo’s public contracts and banks: navigating the debt deadlock
“Banks are no longer supporting us.” This common sentiment among local entrepreneurs engaged in public procurement paints a clear picture of the significant challenges facing Togo’s private sector. Small and Medium-sized Enterprises (SMEs) and state contractors are reporting increasingly stringent conditions for obtaining bank loans and pre-financing, which is severely impeding the progress of numerous infrastructure projects and public works.
The cycle of unpaid public debts
At the heart of financial institutions’ reluctance lies a systemic issue: the mounting accumulation of unpaid invoices following the completion of public contracts.
To execute projects commissioned by government agencies, businesses heavily rely on bank borrowings. 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 schedule.
An analysis by Dr. LANDOZI Saharou: “a direct impact on bank profitability”
In a recent analysis, Dr. LANDOZI Saharou, a corporate finance specialist and economist, meticulously explains the banking mechanisms currently hindering access to credit:
“When a public contract faces payment delays, the associated bank credit gradually deteriorates, eventually categorizing 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 tie up their equity by making substantial provisions. This constraint significantly reduces their liquidity and capacity to grant new financing.”
This phenomenon has visibly impacted the sector’s overall performance: the Togolese financial market recorded cumulative net losses by the end 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 (BTP) SMEs describe a daily operational gridlock:
“We find ourselves caught between a rock and a hard place. On one side, the State demands that work progresses strictly according to specifications. On the other, banks freeze our overdraft facilities the moment a payment certificate 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 guarantees that are almost impossible to provide for simple project pre-financings. Without a public guarantee or endorsement mechanism, small local businesses can no longer compete effectively against larger groups.”
Recommendations: towards an equitable sharing of risks
In light of this impasse, Dr. LANDOZI Saharou and several financial experts advocate for a comprehensive review of public procurement governance, proposing the implementation of a risk-sharing model:
Creation of a dedicated guarantee fund: This 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 specifically for the repayment of granted bank loans.
Securitization of arrears: Transforming accumulated public debts into negotiable securities would help clean up bank balance sheets and free up much-needed liquidity.
According to Dr. LANDOZI Saharou, the successful implementation of these reforms would enable commercial banks to reclaim their vital role as economic drivers: “remaining profitable while continuing to securely finance national development and public procurement.”
