Togo: Microfinance institutions slow down on lending as overdue loans spike amid Covid-19 pandemic

Banking

Tuesday, 09 February 2021 14:24

Togo: Microfinance institutions slow down on lending as overdue loans spike amid Covid-19 pandemic

(Togo First) - Amid the Covid-19 pandemic, microfinance institutions active in Togo considerably lowered loans to the public in the nine first months of 2020. Indeed, after recording two-digit growth in the years before, unpaid loans from these entities had grown by 0.7% only at the end of September 2020, data from the central bank of West African States (Banque centrale des Etats de l’Afrique de l'Ouest - BCEAO) shows.

Meanwhile, overdue loans have risen across the WAEMU over the period under review. Indeed, the gross deterioration rate of the credit portfolio of microfinance institutions operating in the region grew from 7.6% to 9.1% between Sept. 2019 and Sept. 2020. This is far above the 3% norm set in the sector.

The situation caused decentralized finance systems to be more cautious with the loans they grant.

1 DEPOSIT

Deposits are on the rise

Regardless, in Togo, deposits kept increasing over the period. Year-on-year they grew by CFA20.3 billion or 8.7% over the period covered.

The country, with its population of 7.8 million people, recorded the fourth-best performance in this segment in the WAEMU. It was behind Côte d'Ivoire (+44.6 billion or 13.4% y/y), Burkina Faso (39 billion or +15.3%), and Benin (31.9 billion or +26.8%).

After Togo came Senegal (+17.32 billion, +4.5%), Mali (+15.26 billion, +14.2%), Niger (+490 million, +1.9%), and Guinea Bissau where deposits slumped by CFA2.4 million (-2.5%).

According to BCEAO, the overall upward trend was “favorable to financial inclusion, in a context where restrictions imposed due to the health crisis were gradually being lifted”. Across the whole Union, deposits made soared by CFA169 billion, from 1,454 billion to 1,623 billion (+11.6%), year-on-year.

Ayi Renaud Dossavi

REFORMS OVERVIEW

STARTING A BUSINESS (more info)

At the fifteenth position, worldwide, and first in Africa, under the Starting a Business index of the 2020 Doing Business ranking, Togo sustains its reformative dynamics with more reforms….

ENFORCING CONTRACTS (more info)

Compared to some years ago when it was one of the lowest rankers under the Doing Business’ Enforcing Contracts indicator, Togo, leveraging many efforts to improve its business climate, was able to jump significantly on the index in the recent years... .

CONTRACT EXECUTION (more info)

Creation of special chambers of commerce for small debts • Creation of chambers of commerce at the Court of Appeal • Civil and commercial cases now handled by distinct clerks • Establishment of commercial courts in Lomé and Kara • Lawyers and bailiffs now have access to the FORSETI COMMERCIAL platform • A maximum period of 100 days was fixed to settle a commercial dispute .

TRADING ACROSS BORDERS (more info)

In comparison to previous years,Togo has significantly improved its ranking under the“Trading across borders” indicator by adopting multiple reforms that focus mainly on the digitization and reduction in delays, for import and export procedures related to import and export.

In comparison to previous years, Togo has significantly improved its ranking on the “Trading across borders” index by adopting multiple reforms that focus mainly on the digitalization and reduction in delays, for import and export procedures related to import and export.

CONSTRUCTION PERMIT (more info)

After moving from the 133rd to 127th place under the 2020 Doing Business’ construction permit index, Togo intends to reiterate this feat in the coming edition of the global ranking. To this end, it has introduced this year multiple reforms.

GETTING ELECTRICITY (more info)

Over the past two years, Togo’s ranking under the Doing Business’ Getting electricity and water indicator has increased consistently. Owing this performance to multiple reforms aimed at making it easier for businesses to access power and water, Lomé plans to introduce even more reforms this year to keep up its improvements.

REGISTERING A PROPERTY (more info)

Out of all the 'Doing Business’ indicators, Property Registration is where Togo has improved the most since 2018. Indeed, after spending years in the lowest part of this ranking, the country now seeks to beat Rwanda which is the best performer on this index in Africa. To do so, Lomé has been introducing many reforms, with the latest batch implemented this year.

PUBLIC PROCUREMENT (more info)

From professionalization to digitization, through legislative regulations, Togo’s public procurement framework is constantly being modernized. Several reforms have been implemented to improve the sector much to the benefit of the private sector, which is the focus of the National Development Plan.

PAYING TAXES AND DUTIES (more info)

To improve its business environment, Togo introduced some important reforms related to the payment of tax and duties. From the replacement of some taxes to the cancellation of others through exemptions, the country has only one objective: offer the most attractive tax framework to investors and economic operators. To achieve this, the authorities relied on digitization.