Togo’s public contracts and banking sector: bridging the financing gap

A recurring lament from local entrepreneurs involved in public procurement in Togo underscores a significant hurdle for the nation’s private sector: “Banks are no longer supporting us.” Small and Medium-sized Enterprises (SMEs) and other companies providing services to the State report increasingly stringent conditions for obtaining bank credits and pre-financing. This tightening of financial access is notably impeding the progress of numerous infrastructure projects and public works contracts.

The spiral of unpaid debts

At the core of this reluctance from financial institutions lies a systemic issue: the mounting accumulation of unpaid debts following the execution of public contracts.

To undertake projects commissioned by public administrations, businesses heavily rely on bank loans. However, when delays in payment occur from the treasury or public entities, the repayment chain breaks. This leaves companies unable to meet their payment deadlines with banks on time.

Dr. Landozi Saharou’s analysis: direct impact on bank profitability

In an analysis published on August 31, 2026, Dr. LANDOZI Saharou, an expert in corporate finance and an economist, meticulously details the banking mechanisms currently restricting access to credit:

“When a public contract experiences payment delays, the associated bank credit progressively deteriorates, eventually classifying 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 capital by setting aside substantial provisions. This constraint significantly reduces their liquidity and their capacity to extend new financing.”

This phenomenon was clearly reflected in the overall performance of the Togolese financial sector, a key area of focus in African economy news. The market recorded cumulative net losses by the end of fiscal year 2025 within the UMOA zone, primarily due to the heavy burden of provisions required to cover non-performing loans linked to public procurement projects.

On the ground, managers of construction and public works 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 according to specifications. On the other, banks freeze our overdraft lines as soon as a payment statement is delayed. We act as a buffer, absorbing cash flow shocks with our own funds, which depletes our working capital.”
• “Banks now demand real collateral, which is almost impossible for simple pre-financings of contracts. Without a public guarantee or endorsement mechanism, small local enterprises can no longer compete against larger groups.”

Recommendations: moving 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 model of shared risk:

• Creation of a dedicated guarantee fund: To secure commitments made by SMEs to banks, thereby reducing provisioning rates.
• Utilization of escrow accounts: To ensure the traceability and direct allocation of public payments towards 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 vital role as economic drivers: “remaining profitable while safely continuing to finance national development and public procurement.”