Ms. Kanayo Awani, is the Managing Director of the Intra-African Trade Initiative at Cairo. African Export-Import Bank (Afreximbank) based in Egypt. She has advised Small SMEs to consider factoring as an important alternative to other trade finance sources like bank loans.
Factoring is a financial transaction in which a business sells its accounts receivable to a third party, called a factor, at a discount.
Awani sees factoring as an effective solution to bridge the gap created by the challenge of inadequate financing for African SMEs. She regrets that factoring is yet to take off fully in Africa. With the region accounting for less than one percent of global factoring volumes in 2017.
She says: “Notwithstanding, the region has demonstrated strong growth in recent years. Factoring volumes are growing from 14.9 billion Euros in 2009 to approximately 22.3 billion Euros in 2017.”
According to Awani, Africa’s factoring volumes are predicted to reach 200 billion Euros by 2021. This results mostly from new market entrants supported by the sustained economic growth.
Afreximbank plays a leading role in facilitating factoring in Africa through various interventions, including supporting the creation of a facilitative legal and regulatory environment for factoring, provision of finance and guarantees to factoring companies.