50 Years Facilitating Open Account - Trade Finance

Making Factoring work for Africa - One day workshop by Afreximbank

Tuesday 6 December 2016

Port Louis, 24 November 2016 – Governments should create enabling environments for factoring in Africa in order to improve the competitiveness of African businesses, Dr. Benedict Oramah, President of the African Export-Import Bank (Afreximbank), said today in Port Louis.

In an address read on his behalf by Kanayo Awani, Managing Director of Afreximbank’s Intra-African Trade Initiative, during the opening of a factoring workshop organized by the Bank in the Mauritian capital, Dr. Oramah said that, given that it used open account methods, rather than the more expensive letters of credit, factoring improved the competitiveness of businesses.

Afreximbank was working hard to support businesses to seize the opportunities that beckoned in the factoring market, he said, adding that the Bank would support factoring companies in lobbying their governments towards creating enabling environments for factoring to thrive.

The President said that because factoring was a small and medium-sized enterprise (SME)-focused product offering and because SMEs, which were “the engines of growth in our economies”, had limited policy-influencing capacities, it was up to multilateral institutions like Afreximbank to help make governments aware of the value and impact of factoring on their economies.

He stated that for factoring to thrive in Africa, it was necessary to address the challenges that plagued factoring businesses in Africa in the 1990s and 2000s. These challenges could be addressed by, among others, increasing knowledge about the factoring business and factorable products, raising the preparation and interest of African businesses in factoring, improving regulatory frameworks and laws, and developing factoring skills on the continent.

Earlier, in an opening statement, Khemalini Hurdowar, Head of Legal at the Financial Services Commission of Mauritius, outlined the role of the commission and the work it was doing to support factoring in the country.

Erik Timmermans, Deputy Secretary General of FCI, the leading international factoring body, said that factoring assisted clients by improving their cash flow, eliminating credit losses, reducing operating expenses, expanding working capital finance through advances, and improving management of information.

It also assisted factors by allowing for the direct monitoring of receivables portfolios, giving greater collateral control and improving collection of debts, he said.

Mr. Timmermans added that studies had shown that the availability of factoring led to increased trade flows.

Topics covered during the one-day workshop included: key success elements for factoring companies; credit insurance in factoring; insight into global factoring industry-spotlight on Africa; the legal and regulatory environment of factoring in Africa; the role of commercial and development finance institutions in growing and financing factoring in Africa; and experiences of African start-up factors.

The workshop, titled “Making Factoring Work for Africa: Understanding and Adapting the Principles and Practice”, sought to raise awareness of factoring as an alternative trade finance tool in Africa. It marked the end of a four-day Afreximbank training series that started on 21 November with a two-day Structured Trade Finance Seminar, followed on 23 November by a workshop on agency and syndications.

About 200 people from 22 countries, including senior executives from African banks and financial institutions, regulatory institutions, hedge funds, Africa country funds and venture capital institutions, corporate entities engaged in trade, manufacturing and privatized infrastructure projects, Afreximbank’s trade finance and project finance intermediaries, African law firms and insurance firms, participated in the trainings.