The
African Capacity Building Foundation
(ACBF), which is the African Union
(AU)’s Specialized Agency for capacity building, and the African Export-Import Bank (Afreximbank)
have engaged the Pan-African Parliament,
through the Committee on Monetary and
Financial Affairs, to consider the adoption of a Model Law on Factoring.
The
Model
Law on Factoring was developed by Afreximbank
and was identified as one of the instruments to support its Intra-African Trade
Strategy and Industrialization and Export Development Programme under its 5th
Strategic Plan because of the increasing opportunities for factoring in Africa.
Afreximbank is collaborating with ACBF to develop tailor-made
certification programmes on Factoring as well as support law makers and
regulators with various forms of sensitization campaigns and outreach on the
Model Law.
In
his presentation to the PAP
Permanent Committee on Monetary and Financial Affairs, Mr. Enga KAMENI, Senior Manager: Legal Services Department at Afreximbank indicated that in the current
context of insufficient trade financing resources, Factoring becomes a viable
alternative to promote trade on the continent. He defined Factoring as a unique
blend of services designed to ease the traditional problems of selling on open
account terms. Factoring is based on the idea of selling/ assigning a
business’s outstanding receivables (sales invoices) to the Factor and receiving
a set of trade related services.
“One
of the constraints impeding the growth of Factoring in Africa has been the absence
of a facilitative legal and regulatory environment for factoring to thrive. The
Model Law was developed to guide law makers in various African countries in
preparing and introducing relevant pieces of legislation in their respective
jurisdictions. We will continue to work with the ACBF in engaging the PAP
in a bid to disseminate and get African Parliamentarians to adopt the Model
Law. This has become crucial given an opportunity for factoring through
intra-African trade presented by the African
Continental Free Trade Area (AfCFTA),” said Mr. Kameni.
Mr. Peter MULROY, Secretary General of
FCI, the Global Representative Body for Factoring and Financing of Open Account
Domestic and International Trade Receivables, told African Parliamentarians
that Africa, the “future” where the Factoring is expected to grow rapidly, adds
up to over 24 billion euro with a growth of 10%, largely thanks to the
contribution of the older players like South Africa (+12%) and Egypt (+14%).
“World
factoring statistics indicate that the Factoring and Receivables Finance
Industry volume shows solid growth, with all regions indicating positive
trends. The industry found an accelerated gear in 2017 and 2018 with a 9% and
6% increase respectively, and again in 2019 which grew by 5.4% another fine
year,” said Mr. Mulroy.
Hon. James GONY, Chairperson of the
PAP Committee on Monetary and Financial Affairs welcomed the initiative and the
prospect of a Factoring Model Law for the continent. Hon. Gony signaled his Committee’s commitment to work with Afreximbank and ACBF to finalize the process and ensure that it is adopted the PAP Plenary.
“Our
Committee is tasked with advising Parliament on economic, monetary and
investment policies. Factoring presents an opportunity to boost Africa’s trade
especially given the rise of the African middle class. We will therefore ensure
that the Model Law goes through the appropriate process which includes the
adoption of the report of this meeting and thorough consultations with
stakeholders before its adoption by the PAP Plenary.” Said Hon. Gony.
Afreximbank and ACBF stress that the
Factoring industry has enjoyed a long history with a low record of credit
losses and continuous stable growth. As an alternative form of traditional
trade finance, Factoring has been described as one of the very few mechanisms
within the wider financial services industry whereby a financial institution
purchases the assets from the SME client, in this case the account receivables
and all of their underlying rights, including the right of collection of
payment from the debtor/customer.
As
part of its ongoing virtual consultations, the PAP Committee on Monetary and
Financial Affairs also received a briefing on the proposed Model Law on Cooperatives in
Africa. In 2019, the International Cooperative Alliance and the PAP
Committee engaged on the possibility of adopting a Model Law on cooperative
enterprises for African countries to promote the relevance of cooperatives in
socio-economic development in Africa, and obligations towards States and other
stakeholders, specific to cooperative development. The follow-up meeting served
to determine the next steps of the Model Law formulation process.
Source: Mr. Jeffrey
Onganga, Media
Officer, Pan African Parliament
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