African countries should take make use of factoring in order to take advantage of the opportunities for expanding the continent’s regional value chains, participants at a regional factoring conference held in Dakar have heard.

Kanayo Awani, Managing Director of the Intra-African Trade Initiative at the African Export-Import Bank (Afreximbank), said on Wednesday at the opening of the two-day Regional Conference on Factoring that, in spite of the potential upside, Africa’s small and medium-sized enterprises (SMEs) continued to face difficulties in accessing finance.

Ms. Awani, who is also Chairperson of FCI’s Africa Chapter, noted that in other regions, such enterprises accounted for the largest shares of trade finance transactions concluded through factoring, noting that in Europe, for instance, factoring represented 10.4 per cent of GDP at 1.5 trillion Euros.

Africa only accounted for one per cent of global factoring transactions, stated Ms. Awani who explained that the low volumes of factoring in Africa was largely attributable to lack of information and awareness.

She said that the conference, co-organized by Afreximbank and FCI, the global representative body for the factoring and receivables finance industry, was to equip participants with relevant tools to tap into the opportunities available to grow factoring in the continent, especially in the context of intra-regional trade.

Ms. Awani added that the event would provide a regional view on factoring and offer attendees opportunity for discussions on the current state of the industry, new challenges, products and markets development. It would also create new skills and networking opportunities for the participants and give them practical information on successfully setting up factoring businesses.

Earlier, Peter Mulroy, Secretary General of FCI, said that despite the low factoring level in Africa, the continent had achieved important milestones that could help develop it further in the years to come.

“Today we are witnessing the birth of numerous initiatives at the government, ministerial and central bank levels in such markets as Cameroon, Nigeria, Ghana and others. This is, in part, thanks to the development of the model law on factoring by Afreximbank, the removal of burdensome stamp duty tax, the development of inclusive policies at the central bank level to promote and support financing to SMEs through factoring, and the push for development of cross-border factoring,” he added.

Also speaking, Ismaila Gueye, Coordinator at the Directorate of Financial Sector and Competitiveness at the Ministry of Economy and Planning of Senegal, who represented his Minister, said that African exporters were encountering a loss of competitiveness due to the fact that factoring and open account trade were not commonly used in Africa as was the case in all other regions of the world. He commended Afreximbank and FCI for promoting such financial practices, saying that it would help put local SMEs on a level playing field with their global competitors.

The conference brought together more than 80 representatives of central banks, regulatory bodies, government agencies, legislative authorities, commercial banks, law firms, entrepreneurs, exporters and factoring companies from West Africa and beyond.

The presentations delivered by Ms. Kanayo Awani of Afreximbank and Mr. Peter Mulroy of FCI are available to download courtesy of Afreixmbank.

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Managing Director of the Intra-African Trade Initiative, Afreximbank

We are excited that this Conference which we have dubbed “Domestic and International Factoring: Alternative Tools for Developing SME Financing in Africa” is taking place in this historic and beautiful resort city of Dakar. The vibrancy of this country, most importantly, is etched in the hospitality of its people (Teranga), which we have enjoyed since arriving here.

There couldn’t have been a better location for the Conference!

Today’s workshop is a continuation of the Bank’s capacity building activities aimed at developing the skills of African factors, creating awareness on the potential benefits of the product and ultimately, promoting the emergence and development of factoring businesses across the continent. This particular workshop is however, unique in that it will look concretely at the importance and effectiveness of factoring in developing SME financing in Africa.

There is overwhelming evidence that regional cooperation and integration remain the key instruments through which an African economic renaissance can be attained and marginalization mitigated.

Indeed intra-African trade and deeper regional integration provide impetus for the expansion of value chains through industrialization. This presents new market opportunities for enterprises, in particular SMEs.  This is because Senegal’s Industrial Park on the outskirts of Dakar can be the processing hub for Mali’s cotton, yarn or even fabrics. Senegal can also process its groundnuts and those of the region; as well as its fish and those of its neighbours such as Mauritania. However, in spite of the potential upside, small and medium sized enterprises, and in fact whether in terms of regional or domestic supply chains, continue in Africa to face a large number of constraints chiefly the lack of access to finance.

Taking learnings from other regions, such as Europe, where SMEs account for the largest share of factoring volume which is the equivalent of 10.4% of the GDP for EU or 1.5 Trillion Euros, the opportunity exists for Africa to expand its regional value chains through factoring.

The paradox however is that Africa, a continent exceptionally endowed with both human and natural resources, presently accounts for a paltry 1 percent of the global factoring turnover.

It is within this context that the Bank is leading efforts to develop factoring in Africa. The Bank has a dedicated line to support factors in Africa. The Bank also sponsored the development and promotion of a Model Law on Factoring in Africa that was launched in October 2016. The Bank partners key institutions across the continent to advocate for reforms in financial regulations to facilitate growth of factoring in Africa case in point being the collaboration with Nigerian Export Import Bank (NEXIM) in pushing for changes to the foreign exchange regime in Nigeria to admit Factors as dealers of foreign exchange in a bid to expand the modes of payment to include Open Account.

The Bank is also working with the Organization for the Harmonization of Business Law in Africa (OHADA) to institute and harmonize Factoring law among its 17 West and Central African member countries, using Afreximbank’s model law as guide.

Government of the Republic of Senegal, through the Emerging Senegal Plan (Plan Sénégal Émergent), emphasizes financial inclusion and SME support as a critical pillar for structural transformation. The food and beverage industries in Senegal, for instance, which are already playing a critical role across regional value chains in West Africa, presents a blueprint for empowering SMEs through factoring as a tool for accelerating regional integration.

We believe that this Conference is an integral part in the journey to transform Africa. The knowledge we will garner in the next two days will be instrumental in equipping participants with relevant tools to support the growth of factoring in the continent.

As I close, please permit me, Honourable Minister, distinguished Ladies and Gentlemen, to use this opportunity to thank the Government of Senegal for supporting this Conference. I also thank our partner, FCI, as well as our event Sponsors, who have helped make this Conference possible. Our gratitude also goes to all Resource Persons. We also welcome attendees, some of whom have travelled from far distances. We will be pleased to meet and engage with you all and look forward to continuing dialogue into the future.

I trust that you will all find this Conference a rewarding learning experience. 

I thank you.