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-organised 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.