Afreximbank and FCI Lead Factoring Conference to Boost SME Finance and Intra-African Trade

Africa-focused factoring conference aims to empower SMEs and enhance regional trade financing through innovative solutions.

In its ongoing commitment to establish factoring as a viable financing solution for Africa’s small and medium-sized enterprises (SMEs), thus bolstering their participation in intra-regional trade and industrialisation, the African Export-Import Bank (Afreximbank) and FCI recently held a two-day factoring conference in Harare.

Centred on the overarching theme of “Empowering Economic Growth Through Innovative Factoring and Receivables Finance Solutions” and the sub-theme of “How factoring can serve as a catalyst for the financial inclusion of SMEs,” the two day workshop that was held on April 22 – 23, focused on the pivotal role SMEs are poised to play in intra-African trade under the African Continental Free Trade Agreement (AfCFTA). Co-organised in collaboration with FCI, the global body for factoring, the conference provided a platform for in-depth discussions and strategic initiatives to promote and enhance factoring within the Southern Africa region.

Factoring provides an important alternative to other traditional financing sources available for SMEs such as bank loans, leasing, venture capital. And while factoring is globally acknowledged as an alternative form of financing to SMEs as evidenced by the EUR 3.7 trillion global factoring volumes, a recent study by Afreximbank on the financing schemes employed by SMEs in Africa showed that only 90 of the 2,895 sampled (representing 9.2 percent), used factoring as a financing option. This is instructive for two reasons. Firstly, it shows that factoring has not yet taken off to the extent that it should, with Africa accounting for less than 1 per cent of global factoring volumes. Secondly, and perhaps more importantly, it demonstrates the huge potential factoring holds for our continent.

Kanayo Awani, Executive Vice President, Intra-African Trade and Export Development Bank, Afreximbank, and FCI Board member

She highlighted the contribution of Afreximbank in developing a model law that has since been adopted by seven countries, the provision of over US$100 million in financing, technical training to over 30 emerging factors in 2022/23 and over 3,000 delegates being exposed to awareness of factoring, with the sum effect of double growth in factoring volumes in Africa from EUR 21.6 Billion in 2017 to EUR 41.8 Billion in 2023. She added however that, despite the steady progress we have made in growing factoring, there remains substantial work to cover given the over US$330 billion SME finance gap per annum and overall factoring volumes of 1% in Africa.

It is in this context that the theme for the workshop is not only relevant, but also timely, reflecting both the urgent need to grow factoring, and at the same time, highlighting the potential of factoring in promoting economic growth in Africa – as seen in Europe and America.

Kanayo Awani, Executive Vice President, Intra-African Trade and Export Development Bank, Afreximbank, and FCI Board member

Open account trade finance (Factoring, Supply Chain Finance) is one of the most crucial financial services that can assist the growth of SMEs and their local economy. It provides the necessary liquidity to SMEs by converting their accounts receivables or invoices into cash. There is so much opportunity to fill the trade finance gap that exists across the globe through Factoring and Open Account Trade Finance. The World Trade Organization recently reported a US Dollar 2.5 trillion trade finance gap – much of which is with SMEs and emerging markets. But receivables are a very strong and a reliable asset that is self-liquidating.  Factoring, Open Account, and Reverse Factoring are tools that can generate working capital to allow SMEs to grow.

Neal Harm, Secretary General, FCI

Harm also presented the just released preliminary World Factoring Statistics showing that the steady growth of factoring in Africa continues, with 2023 witnessing a notable 13.5% increase compared to 2022, reaching a total volume of EUR 47.48 billion. This figure however represents a paltry 1.3% of the global factoring volume of EUR 3.7 million.

The Factoring Conference comes at the right time, not just for Zimbabwe but also for Southern Africa to reflect and consider how best we can tap into the global and regional best practice in unlocking sustainable finance provided through factoring. Africa, as a continent can do better in promoting both international trade and factoring. We are grateful to Afreximbank who continue to support factoring in Southern Africa, including in Zimbabwe, where two-thirds of the Gross Domestic Product (GDP) is from SMEs and 60% of SMEs are women-owned, making factoring a gender- inclusive agenda.

Dr. J.T. Chipika, Deputy Governor, Reserve Bank of Zimbabwe

 She acknowledged that the Workshop comes hot on the heels of Zimbabwe’s new monetary policy framework introduced this month, and very timely in attracting 24 African countries and nine others to showcase the new Zimbabwe and its economic resilience. Afreximbank’s continuing support was recognised as a backbone for the Zimbabwean economy especially during its financial exclusion from capital markets.

The Deputy Governor further emphasised that factoring and receivable financing will only thrive in a stable macroeconomic environment “hence the importance of Afreximbank’s support to Zimbabwe towards attaining macroeconomic stability, especially in prices and exchange rates.”

Factoring Roundtables will be organised on the sidelines of the Afreximbank Annual Meetings to be held in Nassau, The Bahamas during June 12-15, 2024, FCI Annual Meeting in South Korea during June 9-13, 2024, and the Factoring Seminar during the Afreximbank Annual Trade Finance Seminar to be held in Namibia from June 1 – 4, 2024.

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