AfreximBank reaffirms its support for factoring as an alternative source of trade finance

The African Import-Export Bank (AfreximBank) reaffirmed its commitment to support factoring as a viable alternative source of trade finance for small and medium enterprises (SMEs) in Africa.

He said: “As access to finance remains a key constraint for SME operations in Africa, the availability of sustainable trade finance is essential to propel the African Continental Free Trade Area (AfCFTA). “

Factoring is a financial transaction and a type of debt financing in which a business sells its receivables or unpaid invoices to a third party at a discount.

The Model Factoring Law, developed and promoted since 2016 by AfreximBank, a development partner of the African Capacity Building Foundation (ACBF) has become more relevant than ever, with the launch of the AfCFTA, according to its press release copied in Ghana News Agency.

Lack of access to trade finance has been one of the factors hampering trade, especially for small and medium enterprises (SMEs) across the continent.

While several innovative development finance solutions have been introduced to address the challenge, many companies still have limited access to trade finance mainly related to perceived potential risks and losses.

In addition, given the negative and disproportionate impact of Covid-19 on the finances of SMEs in Africa, there is an urgent need and an opportunity to promote factoring to enable SMEs to grow their businesses, expand their export capacity, increase intra-African trade. as part of post-Covid-19 recovery and resilience to better rebuild.

The Managing Director of the Bank’s Intra-African Trade Initiative and President of the Africa Section of the FCI, Kanayo Awani, recently told attendees of a virtual workshop focusing on ‘Factoring Opportunities in Africa’ that “the Bank had to date provided funding to emerging factoring. in Cameroon, Senegal, Congo, Zimbabwe, Botswana and Nigeria, while factoring volumes in Africa increased by 10% to reach 24 billion euros in 2019. ”

The Executive Secretary of ACBF, Prof. Emmanuel Nnadozie, said: “The Foundation is convinced that factoring is an efficient and user-friendly solution and game-changing potential available to African businesses.

“Technically, factoring is not a loan, but a facilitator. So I implore both budding and existing entrepreneurs to make an effort to learn more and enjoy the facility.

“We will also contribute to the realization of various capacity building initiatives, including; involve legislators from continental to regional level to ensure that parliaments are familiar with and support the adoption of the model factoring law, ”he added.

ACBF also called on key stakeholders such as government officials, African regional organizations, regulators, chambers of commerce and the private sector in general, to work towards improving the legal and regulatory environment of factoring, adding that confidence in the facility would open doors for many players. to reap the benefits of intra-African trade and grow Africa’s economy.