Dakar, 16 June 2023: – Factoring volumes in Africa is expected to reach EUR50 billion by 2025, Kanayo Awani, Executive Vice President, Intra-African Trade Bank, at the African Export-Import Bank (Afreximbank), has said addressing the Regional Conference on Factoring, Receivables Finance and Credit Insurance in West Africa, which opened in Dakar on Wednesday, 7 June 2023. The three-day Conference was co-organized by Afreximbank, FCI, BCEAO-COFEB to allow senior executives from African banks, government officials, regulators and entrepreneurs interested in starting a factoring activity, to learn about international factoring, its benefits and growth opportunities and gain a better understanding of the benefit of using Credit insurance, its mechanisms and how to use it best with factoring.
Ms. Awani, who is also the Chairperson of the Africa Chapter of FCI, the global representative body for the Factoring and Receivables Finance Industry, noted that the volumes were currently “in the north of EUR41.8 billion”.
She called for more to be done to ensure that factoring was effectively deployed to unlock the potential of African small and medium-scale enterprises (SMEs), particularly in terms of scale, market expansion and market participants. Africa remained a marginal player in the global factoring market, according to her, accounting for about 1% of the EUR3.7 trillion global factoring volumes in 2022 (according to FCI statistics), and with the factoring volumes concentrated in a handful of countries, namely South Africa (89%), Morocco (6%) and Egypt (3%) which account for about 98% of the factoring volumes.
Highlighting that factoring provides an important alternative to the other external financing sources available for SMEs, Ms. Awani reaffirmed Afreximbank’s leadership in driving it as an alternative to traditional lending to support SMEs in Africa. The sector had remained the most vulnerable despite being the lifeblood for the development of the continent, representing over 90% of all businesses, employing between 60% and 80% of the labour market and contributing over 40% to GDP. Afreximbank signed two factoring deals at the conference to the tune of circa EUR 15 million that will go a long way to support SMEs accessing finance across the continent.
“The vulnerability of the SMEs arises largely from lack of access to affordable and effective finance,” she said. “Ensuring availability of adequate and appropriate financing to SMEs is essential to help them develop to their full potential. It is only through making such financing available that they will be able to grow and mature to take advantage of trade opportunities under the African Continental Free Trade Area (AfCFTA) Agreement, for instance.”
Also speaking, Peter Mulroy, Secretary General of FCI, said that education and the creation of a proper legal framework are the key ingredients for a successful factoring environment.
“Education is key to the entire supply chain ecosystem, not just for future practitioners, like commercial banks and non-bank financial institutions, but also for lawyers, accountants, legislatures, regulators, central bankers, and, more importantly, the SMEs and corporates themselves”, he stated.
“At the same time, factoring laws regulate the market and ensure trust and confidence for investors in factoring to ensure they are protected and have redress in the courts”, he added. The creation of receivables registries also reduces the possibility of fraud by ensuring that the same invoice is not factored twice.
The Secretary General of the BCEAO, representing its Governor, Mr Jean-Claude Kassi Brou, officially opened the conference by stating that the WAEMU was one of the most dynamic regions in sub-Saharan Africa over the last 10 years, with an annual increase of 6%. This performance is due to the actual reform push by the highest authorities of the states to accelerate the emergence of economies. Based on this, the BCEAO have set priorities to promote and develop factoring to release the potential of MSME growth. Under the BCEAO initiative, the uniform factoring law in WAEMU was adopted on 10 December 2020. Five states have already adopted the law, namely Burkina Faso, Côte d’Ivoire, Mali, Niger, and Togo. The expectations are high as SMEs represent close to 95% of the companies and employ the most in the private sector.
The three-day Conference, co-organised by Afreximbank, FCI, BCEAO-COFEB, featured discussions focused on the world of factoring; what, where and how to use the product; the legal and regulatory requirements; the credit insurance landscape; the role of the digitalization in the industry; and more. Over 150 participants from across West Africa registered to attend the conference. Attendees also benefitted from the Credit Insurance Workshop, highlighting the landscape, mechanisms and Information Technology, and sharing the fundamentals.
– ENDS –
About Afreximbank:
African Export-Import Bank (Afreximbank) is a Pan-African multilateral financial institution mandated to finance and promote intra-and extra-African trade. For 30 years, the Bank has been deploying innovative structures to deliver financing solutions that support the transformation of the structure of Africa’s trade, accelerating industrialization and intra-regional trade, thereby boosting economic expansion in Africa. A stalwart supporter of the African Continental Free Trade Agreement (AfCFTA), Afreximbank has launched a Pan-African Payment and Settlement System (PAPSS) that was adopted by the African Union (AU) as the payment and settlement platform to underpin the implementation of the AfCFTA. Working with the AfCFTA Secretariat and the AU, the Bank is setting up a US$10 billion Adjustment Fund to support countries to effectively participate in the AfCFTA. At the end of 2022, Afreximbank’s total assets and guarantees stood at over US$31 billion, and its shareholder funds amounted to US$5.2 billion. The Bank disbursed more than US$86 billion between 2016 and 2022. Afreximbank has investment grade ratings assigned by GCR (international scale) (A), Moody’s (Baa1), Japan Credit Rating Agency (JCR) (A-) and Fitch (BBB). Afreximbank has evolved into a group entity comprising the Bank, its impact fund subsidiary called the Fund for Export Development Africa (FEDA), and its insurance management subsidiary, AfrexInsure, (together, “the Group”).
For more information, visit: www.afreximbank.com
Follow us on Twitter | Facebook | LinkedIn | Instagram
About FCI
FCI was set up in 1968 as a non-profit global association for factoring companies around the world. Today, FCI has grown into the world’s representative factoring and receivables finance association and business network with close to 400 members in 95 countries. Today, FCI is truly the global representative body for the Factoring & Receivables Finance Industry. FCI offers three primary pillars of support to the industry:
CONNECT: the Business network aids its members by providing a legal and messaging platform to execute cross-border factoring activities between both export and import factors
EDUCATE: FCI promotes and develops best practices in both domestic and international factoring and related Open Account Finance products
INFLUENCE: FCI promotes and defends the industry with stakeholders and policy makers worldwide
For more information visit: https://fci.nl
Follow us on Linkedin, Facebook or Twitter
About BCEAO – COFEB
The West African Center for Banking Studies and Training (COFEB) is the capacity building and training center of the Central Bank of West African States (BCEAO). Created in August 1977, the Authorities of the Central Bank made an institutional change of its missions to include the promotion of research in November 2019. In this regard, the Center carries out studies, conducts prospective and strategic reflections on subjects of interest to BCEAO and the West African Economic and Monetary Union (WAEMU) member states as well as for its banking and financial institutions.
This change reflects mainly the ambition of the Governor of BCEAO, Mr. Jean-Claude Kassi BROU, to establish the COFEB as a leading Center in capacity building and research among Central Banks’ institutes in Africa and beyond.
COFEB contributes to capacity building of BCEAO Executives and the staff members of Central Banks partners, private banks, financial institutions, microfinance institutions, electronic money issuers, universities, and the public sector in WAEMU. To this end, COFEB organises seminars and workshops, high-level conferences, as well as training courses leading to the obtention of Diplomas and Executive Certification.