Togo’s public procurement: navigating the credit crunch for local businesses

“Banks no longer support us.” This recurring sentiment from local entrepreneurs engaged in public procurement in Togo highlights a significant challenge for the nation’s private sector. 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, which in turn slows down the execution of numerous infrastructure projects and public contracts.

The spiral of unsettled debts

At the core of this reluctance from financial institutions lies a fundamental issue: the accumulation of unpaid debts following the completion of public contracts. To undertake the work commissioned by government administrations, businesses heavily rely on bank loans. However, when payment delays occur from the national treasury or public entities, the repayment chain breaks down, leaving companies unable to meet their financial obligations to banks on time.

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

Dr. LANDOZI Saharou, an expert in corporate finance and economics, has shed light on the banking mechanisms currently restricting access to credit. He explains: “When a public contract experiences payment delays, the associated bank credit progressively deteriorates, eventually categorizing as doubtful or non-performing loans (NPLs). In adherence to the prudential requirements set by the Banque Centrale des États de l’Afrique de l’Ouest (BCEAO), banks are then compelled to immobilize their equity by setting aside substantial provisions. This constraint significantly reduces their liquidity and their capacity to grant 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, largely attributed to the 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 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 as soon as an invoice is delayed. We act as a buffer, absorbing cash flow shocks with our own funds, which ultimately depletes our working capital.”
• “Banks now demand almost impossible real guarantees for simple market pre-financings. Without a public guarantee or endorsement mechanism, small local businesses can no longer compete against larger corporations.”

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 risk-sharing model:

• 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, purifying bank balance sheets and releasing 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 safely finance national development and public procurement.”