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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