Togo has launched renewed policy reforms aimed at improving loan recovery across its microfinance sector, as authorities move to address a growing rise in unpaid loans that is putting pressure on financial institutions and limiting access to credit for vulnerable groups.
The initiative follows a decline in portfolio quality across the sector, with official data indicating that the portfolio at risk reached 6.7 percent in 2025, more than double the regulatory threshold of 3 percent. This development has raised concerns among policymakers, financial regulators and industry stakeholders about the sustainability of microfinance institutions, which play a central role in financial inclusion across the country.
The issue was discussed during a workshop held in Lomé last week, organised by the Ministry of Finance and Budget in collaboration with the Professional Association of Decentralised Financial Systems. The meeting brought together regulators and sector actors to assess the challenges affecting loan repayment and to propose practical measures to strengthen debt recovery systems.
Microfinance institutions in Togo serve millions of clients, particularly low income households, small traders and informal sector workers who often lack access to traditional banking services. However, rising levels of loan default are increasingly threatening the stability of these institutions and limiting their ability to extend new credit to borrowers.
Government officials have warned that poor repayment behaviour undermines the financial health of microfinance organisations by eroding their capital base and reducing investor and depositor confidence. This, in turn, restricts liquidity and weakens the sector’s ability to support economic activity at the grassroots level.
Finance and Budget Minister Georges Barcola highlighted the systemic risks associated with weak loan recovery, noting that persistent defaults not only affect individual institutions but could also destabilise the broader microfinance ecosystem if left unaddressed. Authorities argue that strengthening recovery mechanisms is therefore essential to maintaining trust in the system.
The microfinance sector in Togo has experienced significant expansion in recent years, now serving approximately 4.7 million members with an outstanding loan portfolio estimated at 352 billion CFA francs. This growth has positioned microfinance as a key pillar of the country’s financial inclusion strategy, especially in rural and underserved communities.
However, rapid expansion has also exposed structural weaknesses, including inadequate credit assessment systems, weak enforcement of repayment obligations and limited borrower education on financial responsibility. These factors have contributed to the rising level of non performing loans now seen in the sector.
During the Lomé workshop, participants examined existing debt collection challenges and explored potential reforms aimed at improving repayment rates. Discussions focused on strengthening institutional frameworks, improving monitoring systems and introducing more effective enforcement tools while ensuring that access to credit is not excessively restricted for low income borrowers.
The government has indicated that it is committed to supporting the sector through the implementation of a newly adopted microfinance law, which is expected to introduce stricter regulatory standards and improve oversight of financial institutions. Authorities believe that stronger regulation, combined with better operational practices, will help restore stability and confidence in the sector.
Experts note that improving loan recovery is not only a financial issue but also a development priority, as microfinance plays a crucial role in supporting entrepreneurship, household income generation and local economic activity. Without effective recovery systems, institutions risk becoming unsustainable, which could reduce access to credit and slow down economic progress in vulnerable communities.
At the same time, policymakers are being urged to balance enforcement with financial inclusion objectives, ensuring that reforms do not unintentionally exclude low income borrowers who rely heavily on microcredit services. Striking this balance will be key to maintaining both sector stability and social impact.
As reforms progress, attention will remain on how effectively microfinance institutions can implement new recovery mechanisms and whether regulatory changes will translate into improved financial discipline across the sector. The outcome will play a critical role in determining the future strength and resilience of Togo’s microfinance industry.
