Speaking at a recent one-day seminar in Lusaka, leaders of the African Export-Import Bank (Afreximbank) expressed an urgent need for legislators and regulators to develop appropriate laws that would allow factoring to succeed on the continent.
Dr. Michael Gondwe, Governor of the Bank of Zambia, who also spoke at the seminar, improved education and the acquisition of new skills would help users to take advantage of the opportunities that are available for factoring and would ultimately help increase the continent’s overall share of global factoring business.
Factoring is a tool used in trade finance that allows the seller to issue an invoice and assign receivables to a factor who pays the seller an agreed upon value and assumes ownership of those receivables before collecting the actual payment for the service or product from the buyer.
According to Dr. Gondwe, factoring would expose new opportunities for economic development and provide support to African SMEs operating export value chains through the provision of assistance in accessing credit without requiring additional collateral or security above the receivables normally generated by their business.
In fact, according to Jean-Louis Ekra, President of Afreximbank, as a result of recent socio-economic developments, Africa is positioned to become the next frontier for the factoring business with the volume of the African factoring business already showing an increase from approximately EURO 5 billion in 2000 to nearly EURO 23 billion in 2012.
“If we want SMEs to form the bulwark of the new Africa we are all looking forward to, we must work towards expanding factoring in the continent,” he said in a statement released by the Afreximbank.