Lack of factoring services hinders SME participation in Africa’s value chain - Afreximbank
Cairo, 2014 – Although the volume of factoring business in Africa has risen substantially from $5 billion in 2000 to about $25 billion in 2012, the continent’s volumes remain significantly less than those of other regions of the world, the African Export-Import Bank (Afreximbank) has told legislators and regulators attending a seminar on factoring.
In a message to the opening of the one-day seminar organised by the Bank in Lagos, Afreximbank President Jean-Louis Ekra said that the continent currently accounted for only 1 per cent of global factoring business and that, until recently, all factoring business in Africa took place in South Africa, Tunisia, Morocco and Egypt.
Ninety per cent of the African factoring business took place in South Africa, he stated in the message, read on his behalf by Kanayo Awani, Director of the Bank’s Trade Finance and Branches Department.
“The limited access to factoring services is a major obstacle to SMEs participating in Africa’s gradually expanded value chain,” noted the President, saying, however, that the Bank saw “a very bright future for factoring across the continent” and that “indications are that strong and credible factors will soon emerge in Kenya, Nigeria, Ghana, Cote d’Ivoire, Zimbabwe, Zambia, Mozambique and Senegal.”
“The potential for the emergence of factoring also exists in several other countries,” continued Mr. Ekra, who said that because Afreximbank recognised the importance of factoring as a trade finance tool, it was working very hard to offer support to enable businesses to seize the opportunities in the market.
Attended by more than 75 legislators and regulators from across West and Central Africa, the seminar sought to heighten awareness about factoring in Africa and to begin the groundwork toward a facilitative legal and regulatory environment across the continent.
A prime focus of the discussions was the design and introduction of a model 'best practice' factoring law for Africa.
Closing the seminar, Dr. Benedict Oramah, Afreximbank’s Executive Vice President in charge of Business Development and Corporate Banking, said that the Bank would continue to hold training and awareness creation events in order to foster a facilitative legal and regulatory environment for factoring in Africa.
Presentations on the legal and regulatory aspects of factoring were made by David Tatge of the law firm of Epstein Becker Green of the United States and Erik Timmermans, Secretary General of the International Factors Group. Peter Brinsley of the consulting firm, PointForward, delivered a paper on factoring concepts.
Participants included law makers, central Bankers, heads of national stock exchanges and representatives of factoring companies and law firms from 15 countries in the West and Central Africa sub-region.
Factoring is a trade finance tool under which is a seller assigns his receivables (invoice) on a transaction to a factor who pays him an agreed value. The factor assumes ownership of the receivables and then collects the actual payment for the service/product from the buyer.
