Afreximbank Proffers Factoring to Ease Access to Financing for African SMEs
The African Export-Import Bank
(Afreximbank) has made the case for factoring as a viable and sustainable
solution to address the challenge of access to financing which is hindering the
growth of Africa’s small and medium-scale enterprises (SMEs).
Kanayo Awani, Managing Director of
the Intra-African Trade Initiative at Afreximbank, said on 12 March during a
factoring promotion conference held in Gaborone that factoring, a form of trade
finance provided a solution to address the SME financing gap and would help
innovative SMEs to grow and support Africa’s structural transformation and
trade development.
Ms. Awani, who noted that access
to appropriate and affordable finance had been frequently cited as a major
obstacle for SMEs, explained that factoring was an important alternative to
other trade financing sources, such as bank loans.
Despite its huge opportunities,
however, factoring had not yet taken off fully in Africa, with the region
accounting for less than 1 per cent of global factoring volumes in 2017, stated
Ms. Awani. Notwithstanding that, the region had demonstrated strong growth in
recent years, with factoring volumes growing from Euro 14.9 billion in 2009 to
approximately Euro 22.3 billion in 2017, although most of those volumes were
concentrated in South Africa, Tunisia, Morocco, Egypt, Mauritius and Kenya.
She said that Africa’s factoring
volumes were projected to reach about Euro 200 billion by 2021, resulting
mostly from new market entrants supported by the sustained economic growth;
rapid rise of Africa’s middle class; emergence of innovative industries
supported by technological advancements; rapidly expanding trade and economic
relations between Africa and major economies in the South; and increasing focus
on regional integration and intra-regional trade under the African Continental
Free Trade Agreement.
Afreximbank had been playing a
leading role in facilitating the growth of factoring in Africa through various
interventions, including supporting the creation of a facilitative legal and regulatory
environment for factoring; provision of finance and guarantees to factoring
companies; provision of technical assistance; and formation of strategic
partnerships to promote the development of factoring.
The two-day Factoring Promotion
Conference held under the theme “Domestic and International Factoring:
Alternative tools for SME financing in Africa” on 12 and 13 March, was
organized by Afreximbank and FCI, the global representative body for factoring
and financing of open account domestic and international trade receivables.
It had over 180 attendees and
provided practical information and ideas about how to set up factoring
activities and highlighted the importance of factoring in the development and
promotion of SME financing. Topics covered included benefits and risks of
factoring, mechanics of factoring, and legal aspects of factoring. It also
provided networking opportunities for African factors, bankers, lawyers and
others.
The speakers included Emma
Peloetletse, Accountant General of Botswana, Elaina Gonsalves, Deputy Secretary
for Financial Policy of Botswana, and Peter Mulroy, Secretary General of FCI.