Togo’s public contracts: navigating the credit crunch and seeking shared risk

A recurring lament from local entrepreneurs engaged in public works echoes across Togo: “The banks are no longer supporting us.” This sentiment highlights a significant hurdle for the private sector, particularly for Small and Medium-sized Enterprises (SMEs) and contractors handling state projects. These businesses report increasingly stringent conditions for obtaining bank loans and pre-financing, which in turn slows the progress of numerous infrastructure developments and public tenders.

The escalating spiral of unsettled obligations

At the heart of financial institutions’ reluctance lies a systemic issue: the mounting backlog of unpaid invoices from completed public sector contracts.

To execute projects commissioned by government entities, companies heavily rely on bank borrowing. However, when the national treasury or public bodies delay payments, the repayment cycle collapses. This leaves businesses unable to meet their obligations to banks punctually.

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

In a financial analysis, Dr. LANDOZI Saharou, an expert in corporate finance and economics, meticulously dissects the banking mechanisms currently restricting access to credit:

« When a public contract experiences payment delays, the associated bank credit progressively deteriorates, eventually categorised as a doubtful or non-performing loan (NPL). In adherence to the prudential requirements set by the Central Bank of West African States (BCEAO), the bank is then compelled to tie up its capital by setting aside substantial provisions. This constraint directly diminishes its liquidity and its capacity to extend new financing. »

This phenomenon has visibly affected the sector’s overall performance. Togo’s financial market recorded cumulative net losses at the close of the 2025 fiscal year within the West African Economic and Monetary Union (UMOA) zone, largely attributable to the burden of required provisions for non-performing loans linked to public procurement projects.

On the ground, leaders of construction and public works SMEs describe daily operational paralysis:

• « 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 facilities the moment a payment claim is delayed. We act as the shock absorber, cushioning treasury impacts with our own funds, which drains our working capital. »
• « Banks now demand almost impossible real guarantees for mere project pre-financings. Without a public endorsement or guarantee mechanism, small local enterprises can no longer compete against larger corporations. »

Recommendations: towards an equitable risk distribution

To overcome this deadlock, Dr. LANDOZI Saharou, alongside several financial experts, advocates for a re-evaluation of public procurement governance, proposing a risk-sharing model:

• Establishment of a dedicated guarantee fund: This would secure the commitments made by SMEs to banks, thereby reducing the required provisioning rates.
• Utilisation of escrow accounts: Ensuring transparency and the direct allocation of public payments towards the repayment of granted bank loans.
• Securitisation 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 essential role as economic drivers: « remaining profitable while securely continuing to finance national development and public procurement. »