Togo : Banks becoming firms’ first financial sponsors ?

Banking

Wednesday, 16 May 2018 14:44

Togo : Banks becoming firms’ first financial sponsors ?

(Togo First) - Apparently, in Togo, commercial banks are the main financial contributors to firms’ investments in secondary and tertiary sectors.

Indeed, according to the 5th edition of the macroeconomic forecast investigation (a study based on a sample of 200 firms), local banks are about to become the leading funders (both internally and externally) of Togolese companies.

30% surge

Between 2015 and 2016, the study indicates that banks’ contribution to investment projects grew from 15% to 24.5%. The next year, this figure almost doubled to 44.7%. Let it be recalled that financing via own funds was in 2015 forecast at 79.3%. Meanwhile, equity financing stagnated, growing by 1% only to 3% in 2017.

A rise driven by banks’ appetite

Ministry of economy and finance attributed the greater contribution of banks in firm’s investments to a better performance of the lenders over the past years. Truly, data from BCEAO (West Africa’s Central Bank), loans contracted from banks increased by 22% as interest on these loans slumped (from 15.8% to 11.5%).

In fact, in the first quarter of 2018, this interest rate was below 10%, quite contrasting given the global challenges. Regardless, it attracted much investors, allowing lenders to collect more revenues for interests and related products (+9.2%).

...Still difficult to secure loans

Nevertheless, firms still have issues securing bank loans, according to the document which mentions a lack of guarantee requested by banks. Data shows that 47.1% of firms whose loan application was dismissed claim it is because of a lack of guarantee or one deemed non-credible. Regarding the latter, about 17.6% of firms applying saw their application rejected due to that factor.

Another reason for banks refusing to grant loans to firms is insufficiency of social capital, or investor’s share in a given investment.

However, regarding the lack of information on applicants, the creation of an information bureau for loan (BIC) helped make significant progress.

Fiacre E. Kakpo

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.