Kanayo Awani. PHOTO:www.afreximbank.com
The African Export-Import Bank (Afreximbank) has urged African enterprises to make use of factoring to take advantage of the opportunities for expanding the continent’s regional value chains.
Ms. Kanayo Awani, the Managing Director of the Intra-African Trade Initiative at Afreximbank made this known in a statement on Thursday in Lagos.
Awani gave the advice at the Regional Conference on Factoring held in Dakar.
Factoring is the act of financing invoices from businesses that have cash flow problems due to slow-paying customers.
Factors do not lend money. Instead, they purchase the accounts receivable from their clients at a small discount.
The client gets immediate funds for the receivable, and the factor makes a small gain when the invoice is paid in full.
Awani said that the aim of the conference 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.
Read Also:
According to Awani, in spite of the potential, Africa’s Small and Medium-sized Enterprises (SMEs) have continued to face difficulties in accessing finance.
She said in other regions, such enterprises accounted for the largest shares of trade finance transactions.
She said 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.
“The low volume of factoring in Africa is largely attributable to lack of information and awareness,” she said.
AIsmaila Gueye, Coordinator at the Directorate of Financial Sector and Competitiveness at the Ministry of Economy and Planning of Senegal, said African exporters were encountering a loss of competitiveness because factoring was not commonly used in Africa.
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 was said to have 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.
Source: G Business
