Micro-Project Financing Facility
Micro-Project Financing Facility
Business Model Description
Provide services facilitating access by small and medium-sized enterprises and industries to credits and other financial services based on information, technology and adapted to their needs, including in the agri-food sector, on favourable terms. This business model can benefit from support of the State and its guarantee and refinancing mechanisms for financial institutions through the Central Bank.
Expected Impact
Facilitate access to finance and stimulate growth and employment in SMEs.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Togo: Maritime
- Togo: Plateaux
- Togo: Centrale
- Togo: Kara
- Togo: Savanes
Sector Classification
Financials
Bank credits in Togo were held at 37.6% by 50 companies in 2023. The share of financing granted to Micro, Small and Medium Enterprises (MSMEs) increased from 28% in 2021 to 39% in 2023 but with less advantageous loan conditions, 5.12% average annual interest rate in 2024 while medium-sized companies benefit from a rate of 4.36% (1, 2, 21).
Political priority
The National Agency for the Promotion and Guarantee of Financing of SMEs/SMIs aims to promote and facilitate access to bank financing for Togolese SMEs/SMIs by contributing to resolving problems of access to financing for national companies; providing assistance to SMEs/SMIs in terms of capacity building; and seeking and mobilizing lines of credit for SMEs/SMIs (24).
Gender inequalities and marginalization issues
The number of enterprises registered by women has been steadily increasing, with 942 companies registered between July and September 2022. In December 2022, out of 908 new businesses created, 642 were owned by men and 266 were owned by women, according to the Centre de Formalité des Enterprises (3).
Investment opportunities introduction
Investment opportunities in the financial sector in Togo are varied and reflect increasing modernization. The development of traditional banking services and microfinance institutions promotes financial inclusion. Financial technology (FinTech) is driving innovation in digital payments and mobile banking (6).
Key bottlenecks introduction
SMEs face enormous challenges, such as access to regional markets and limited financing. The mass of bad debts, although decreasing from 19.3% in 2017 to 18.3% in June 2018 to 16.9% in June 2019, constitutes a challenge. Moreover, bad debts remain high in Togo compared to other UEMOA countries outside Benin, Guinea Bissau and Niger (4, 23).
Corporate and Retail Banking
Development need
SMEs constitute one of the essential links in the Togolese economy with a participation of more than 80% in the national economic activity. However, they are seriously confronted with the problem of financing and access to credit according to 37.8% of business leaders; which slows down their production and performance and threatens their sustainability (5).
Policy priority
The West African Monetary Union has a mechanism facilitating funding of SMEs through the refinancing by the Central Bank of receivables held by credit institutions on SMEs eligible for the mechanism. This aims to promote SMEs, improve the supervision of these companies, refinance bank receivables on SMEs and diversify financial instruments suitable for their financing (25).
Gender inequalities and marginalization issues
In Togo, women have even more difficulty than men in starting their business. Today, only 25% of Togolese have access to a bank. Nearly 3 million workers are in the informal economy out of 8 million inhabitants and at least 52% of these activities are carried out by women (8).
Investment opportunities introduction
For SMEs-SMIs involved in the structural transformation of Togolese agriculture, there is an Agricultural Financing Incentive Mechanism based on risk sharing. Thanks to this mechanism, an envelope of $23.3 millions were mobilized for the benefit of 144,000 actors in the agricultural sector across all sectors, including 123,000 producers (7).
Key bottlenecks introduction
¨The double asymmetry of information between SMEs and banks due to the poor quality of accounting data produced by SMEs on the one hand, and the lack of knowledge by SME managers of the decision-making criteria of bankers for granting credits affect the confidence of banks. This results in a certain reluctance of banks to finance these SMEs (22).
Consumer Finance
Pipeline Opportunity
Micro-Project Financing Facility
Provide services facilitating access by small and medium-sized enterprises and industries to credits and other financial services based on information, technology and adapted to their needs, including in the agri-food sector, on favourable terms. This business model can benefit from support of the State and its guarantee and refinancing mechanisms for financial institutions through the Central Bank.
Business Case
Market Size and Environment
< USD 50 million
The amounts of new credits to micro, small and medium-sized enterprises emerged at USD 125 million, USD 18,333 million and USD 68,333 million, respectively, during the first six months of 2022, a total amount of USD 211,667 million. Loans allocated to SMEs represent only 25% of the total amount of new loans in 2022 (28).
In 2023, the private sector received 89% or USD 2.90 billion of the USD 3.258 billion granted to the economy, including 39% granted to MSMEs (USD 1270.62 million). The average interest rate on these credits being 8.5%, the resulting financial services would be at least USD 108 million in 2023, (6.48 million by year based on the 6% annual growth rate recorded between 2022 and 2023) (29).
Indicative Return
15% - 20%
Financial institutions indicate average rates of return of 15-20% over a period of 5-10 years. The financial services of financial institutions on credits offered on the basis of refinancing obtained at low interest rates and for fairly long repayment periods (30).
Investment Timeframe
Medium Term (5–10 years)
With rates of return of around 15-20%, estimated capital recovery periods are between 5 and 7 years, with refinancing requiring longer periods depending on the credits granted to customers, particularly small and medium-sized enterprises (30).
Ticket Size
USD 500,000 - USD 1 million
Market Risks & Scale Obstacles
Market - Highly Regulated
Market - Volatile
Capital - Limited Investor Interest
Impact Case
Sustainable Development Need
Financing needs particularly in the context of the COVID-19 pandemic had been strongly expressed by companies. 23% of companies require financing in general, while the rates are higher for medium-sized companies (40%) and specific sectors (36% in manufacturing and 55% in agro-industry) (23).
The constraint on access to private sector financing is mainly manifested by a reduction in medium and long-term financing and an increase in short-term financing costs, interest rates and guarantees (23).
The banks' distrust in financing SMEs is aggravated by the double asymmetry of information between SMEs and banks due to the poor quality of accounting data produced by SMEs and the lack of knowledge by SME managers of the bankers' decision-making criteria for granting credits (22).
Gender & Marginalisation
In Togo, women face significant obstacles in accessing financial services, credit and entrepreneurial opportunities. Togolese women are disproportionately affected by financial exclusion, limiting their participation in economic activities and hindering their socio-economic empowerment (18).
Marginalized communities, including rural populations, youth and ethnic minorities, have limited access to formal financial services and suffer from socio-economic exclusion. This marginalization perpetuates cycles of poverty and limits opportunities for socio-economic progress (28).
Expected Development Outcome
The micro-project financing facility helps SMEs to improve their management, the quality of their files to make them more likely to benefit from credits corresponding to their needs.
The micro-project financing facility will contribute to better access to credit for SMEs, enabling them to invest in expansion, innovation and job creation.
Gender & Marginalisation
The micro-project financing facility increases gender inclusion in financial services and can lead to greater economic empowerment and social inclusion of women in Togo.
By providing access to financial products and services tailored to the needs of women, such as savings accounts, loans for women entrepreneurs and financial education programmes, the micro-project financing facility can help reduce the gender gap in access to finance.
Primary SDGs addressed
2.3.1 Volume of production per labour unit by classes of farming/pastoral/forestry enterprise size
N/A
10% productivity gain in livestock farming by 2025 (13).
8.10.1 (a) Number of commercial bank branches per 100,000 adults and (b) number of automated teller machines (ATMs) per 100,000 adults
The number of automated teller machines (ATMs) per 100,000 adults increased from 4.8 in 2014 to 6.9 in 2021 (11).
Peace, justice and effective institutions - The media and the internet play an essential role in promoting peaceful and inclusive societies by providing reliable information and promoting transparency and accountability. (12)
9.3.2 Proportion of small-scale industries with a loan or line of credit
Credits allocated to SMEs represent 25% of the total amount of new credits set up for the first half of 2022 (28).
N/A
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Indirectly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Outcome Risks
Refinancing difficulties of banking intermediaries could affect credit conditions (interests and repayment terms), which could be less attractive for SME borrowers and affect loan growth.
Over-indebtedness of SMEs could compromise their financial stability and jeopardize their activities with risks of bankruptcies and job losses.
Impact Risks
The absence of equity criteria in the provision of loans could penalize both SMEs in the interior of the country and those run by women whose activities are most often informal.
Raising the conditions for loans to SMEs could reduce the number of beneficiary SMEs as well as their activities, particularly in sectors requiring more affordable loan conditions.
Impact Classification
What
Micro-project financing facility facilitates access to credit that increases investment and purchasing power, and contributes to sustainable economic growth and job creation.
Who
SMEs benefit from access to finance and improved cash flow, and consumers' access to liquidity improves their purchasing power as SME customers.
Risk
Rigid and less inclusive lending conditions could leave less established SMEs, particularly those in the interior of the country and led by women, behind.
Impact Thesis
Facilitate access to finance and stimulate growth and employment in SMEs.
Enabling Environment
Policy Environment
The Togolese State created by decree No. 2006-065/PR of July 18, 2006 the National Agency for the Promotion and Guarantee of Financing of SMEs/SMIs (ANPGF) to promote and facilitate access to bank financing for Togolese SMEs/SMIs. The ANPGF operates as an independent administrative structure. (31)
Among the missions of the ANPGF are to contribute to resolving problems of access to financing for national companies; provide assistance to SMEs/SMIs in terms of capacity building for promoters and managers; and search for and mobilize lines of credit for SMEs/SMIs (31).
ANPGF’s other missions include to contribute to strengthening the competitiveness of SMEs/SMIs, in particular by improving the quality of goods and services produced and seeking outlets; and contribute, through financial and non-financial support, to eradicating unemployment, particularly among young people (31).
The NDP supports SMEs by improving access to financing and creating a business-friendly environment, including through tax incentives (14).
Financial Environment
A West African Monetary Union Facility aims to promote the financing of SMEs through the refinancing by the Central Bank of receivables held by credit institutions on SMEs eligible for the Facility (32).
The Central Bank's SME financing mechanism includes incentive and simplification measures by States for the emergence of SMEs, assistance to SMEs to meet eligibility conditions, monitoring of financing for the proper use of bank credits, and compliance with deadlines and avoiding payment defaults (32).
Financial incentive: The Agricultural Financing Incentive Mechanism launched in 2018 is a partnership framework between the government and the private sector to boost financing of the agricultural sector by promoting financial products, risk reduction and sharing by value chain actors (33).
Regulatory Environment
A framework law on banking regulations applies to credit institutions operating in the territory of each of the WAEMU countries. Requests for withdrawal of approval or authorization to set up a credit institution are addressed to the Minister of Finance and filed with the Central Bank (9).
The Central Bank of West African States has taken several decisions to regulate credits, including provisions supporting the financing of businesses, such as the decision to set up the support mechanism for the financing of SMEs, and the regulation of the credit information sharing system (9).
Marketplace Participants
Private Sector
Faîtière des Unités Coopératives d’Épargne et de Crédit du Togo; Village Associations Savings and Credit Bank, Saving and Credit Cooperative of the Church of the Assemblies of God of Togo; EcoBank; Atlantic Bank; Coris Bank; Orabank; Sunu Bank; IB Bank, UTB.
Government
Ministry of Economy and Finance, Central Bank of West African States (CBWAS), West African Economic and Monetary Union (WAEMU), National Fund for Inclusive Finance (FNFI), National Agency for the Promotion and Guarantee of Financing of SMEs/SMIs.
Multilaterals
World Bank, International Monetary Fund (IMF), United Nations Development Programme (UNDP), Macrocosmic and Financial Management Institute of East and Southern Africa (MEFMI), African Development Bank (AfDB), African Development Fund.
Non-Profit
Association Professionnelle des Banques et Etablissements Financiers.
Public-Private Partnership
Public-private partnerships and financial institutions facilitate credits to SMEs: the National Agency for the Promotion and Guarantee of Financing of SMEs/SMIs; Central Bank refinancing mechanism for institutions offering credits to SMEs, the Agricultural Financing Incentive Mechanism (31, 33, 34).
Target Locations
Togo: Maritime
Togo: Plateaux
Togo: Centrale
Togo: Kara
Togo: Savanes
References
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- (2) République Togolaise, Le Togo fixe son taux d’intérêt légal pour 2024 à 5,03%, https://www.republiquetogolaise.com/gouvernance-economique/1104-9133-le-togo-fixe-son-taux-d-interet-legal-pour-2024-a-5-03
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