ACBF calls for promotion and adoption of Model Law on Factoring as a way of boosting Trade Finance in support of AfCFTA - AFRICAN PARLIAMENTARY NEWS



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Saturday, March 6, 2021

ACBF calls for promotion and adoption of Model Law on Factoring as a way of boosting Trade Finance in support of AfCFTA

Prof. Emmanuel Nnadozie, Executive Secretary, ACBF

The Model Law on Factoring, developed and promoted since 2016 by the African Export-Import Bank (AfreximBank), a Development Partner of the African Capacity Building Foundation (ACBF) has become more relevant than ever, with the launch of the African Continental Free Trade Area (AfCFTA). 

Lack of access to trade finance has been one of the impeding factors to trade, specifically for small and medium enterprises (SMEs) across the continent. While several innovative development finance solutions have been introduced to address the challenge, there many businesses still face limited access to trade finance mainly linked to perceived potential risks and losses.

Moreover, given the negative and disproportionate impact of COVID-19 on the finances of SMEs in Africa, there is an urgent need and an opportunity for factoring to be promoted to enable SMEs to grow their businesses, expand export capacity, increase intra-Africa trade as part of the post-COVID-19 recovery and resilience to build back better.

The AfreximBank has reaffirmed its readiness to support factoring as a viable alternative source of trade financing for the SMEs in Africa saying, “given that access to finance remains a key constraint to operations of SMEs in Africa, availability of sustainable trade finance, is essential to propel the AfCFTA.”

Factoring is a financial transaction and a type of debt financing in which a business sells its receivables or outstanding invoices to a third party at a discount. It is a form of selling the receivables to an agent at less than its full value in order to trade.

The Banks’ Managing Director of Intra-African Trade Initiative and Chairperson of FCI’s Africa Chapter, Ms. Kanayo AWANI, recently told participants at a virtual workshop focused on ‘opportunities for factoring in Africa,’ that “the Bank had to date provided financing to emerging factoring companies in Cameroon, Senegal, Congo, Zimbabwe, Botswana and Nigeria while factoring volumes in Africa grew by 10% to EUR 24 billion in 2019.”

ACBF Executive Secretary, Prof. Emmanuel NNADOZIE says “the Foundation is convinced that factoring is an effective and friendly solution and a potential game changer that is at the disposal of African enterprises.

Technically, factoring is not a loan but a facilitator. I therefore implore aspiring and existing entrepreneurs to endevour to know more and take advantage of the facility. We are also going to contribute to carrying out various capacity building initiatives, including engaging legislators from the continental to regional levels to ensure that Parliaments are well versed and support the adoption of the Model Lawon Factoring.”

The African Capacity Building Foundation also calls on key stakeholders such as government officials, African regional organizations, regulators, business chambers and private sector in general, to work towards improving the legal and regulatory environment for factoring, saying confidence in the facility would open doors for many players to enjoy the benefits of intra-Africa trade and grow the economy of Africa.

Source: Ntsiuoa SEKETE (Ms), Senior Communication Officer, African Capacity Building Foundation 

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