Togo’s public contracts: unlocking banking finance through shared risk

“Banks are no longer supporting us.” This recurring lament from local entrepreneurs engaged in public contracts in Togo highlights a significant hurdle for the nation’s private sector. Small and medium-sized enterprises (SMEs) and other companies working for the state report increasingly stringent conditions for obtaining bank loans and pre-financing, which in turn impedes the progress of numerous infrastructure projects and public works.

The escalating cycle of unpaid debts

At the core of this reluctance from financial institutions lies a systemic issue: the persistent accumulation of outstanding debts stemming from the completion of public contracts.

To undertake projects commissioned by public administrations, businesses heavily rely on bank loans. However, when payment delays occur from the treasury or other public entities, the crucial repayment chain breaks down. This leaves companies unable to meet their financial obligations to banks on schedule.

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

Dr. LANDOZI Saharou, an expert in corporate finance and economics, has meticulously explained the banking mechanisms currently hindering access to credit. He states: “When a public contract experiences payment delays, the associated bank credit progressively deteriorates, eventually categorizing 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 significant portions of its capital by setting aside substantial provisions. This obligation severely diminishes the bank’s liquidity and its capacity to extend new financing.”

This trend has visibly impacted the overall performance of the sector; the Togolese financial market reported cumulative net losses at the close of the 2025 fiscal year within the UMOA zone. These losses are directly attributable to the substantial provisions mandated to cover non-performing loans linked to public procurement projects.

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

“We find ourselves caught in a dilemma. On one hand, the state demands that projects progress strictly according to specifications. On the other, banks freeze our overdraft facilities as soon as any payment is delayed. We effectively become the shock absorbers, cushioning treasury shortfalls with our own capital, which rapidly depletes our working funds.”

“Banks are now requesting collateral that is almost impossible for us to provide, even for straightforward project pre-financings. Without a public guarantee or endorsement mechanism, smaller local businesses simply cannot compete for contracts against larger corporations.”

Recommendations: moving towards equitable risk-sharing

Confronted with this stalemate, Dr. LANDOZI Saharou, alongside several financial experts, advocates for a fundamental re-evaluation of public procurement governance, proposing the implementation of a risk-sharing model:

• Establishment of a dedicated guarantee fund: To secure the commitments made by SMEs to banks, thereby lowering the required provisioning rates.
• Implementation of escrow accounts: To ensure clear traceability and direct allocation of public payments towards the repayment of granted bank loans.
• Securitization of arrears: To convert accumulated public sector debts into marketable securities, effectively cleaning up bank balance sheets and injecting much-needed liquidity.

According to Dr. LANDOZI Saharou, implementing these crucial reforms would enable commercial banks to reclaim their vital role as economic drivers. This would allow them “to remain profitable while securely continuing to finance national development and public contracts.”