Receivables finance can help close Africa’s US$90bn SME financing gap    

Receivables finance is an important tool that can help to close the US$90billion funding gap faced by small and medium-sized enterprises (SMEs) in Africa, Dr. Patrick Njoroge – Governor of Kenya’s central bank, has said.

Dr. Njoroge was speaking in Nairobi recently, during the opening of a two-day Regional Conference on Factoring and Receivables Finance organised by the African Export-Import Bank (Afreximbank) and FCI to promote the use of factoring in addressing the challenge of access to financing for SMEs in East Africa.

He told the audience that the funding gap could not be filled by traditional banking, and described the conference as a timely initiative that will support efforts to sustain the SME sector in Kenya and East Africa.

According to the Governor, receivables finance is important for Kenya as SMEs are the economy’s backbone.

Also speaking, Kudakwashe Matereke – Afreximbank Regional Chief Operating Officer in East Africa, said that the Bank had placed a premium on the promotion of factoring as a strategic priority, as it will stimulate growth in many African economies and increase intra-African trade while expanding value chains for export development.

He stated that over the last 10 years, Afreximbank has made enormous progress in promoting factoring in Africa through mechanisms such as the launch in 2016 of the Afreximbank Factoring Model Law, which is being used by some African countries as a guide to develop their own national laws on factoring.

Mr. Matereke also listed other mechanisms to include the provision of finance and guarantees, training and capacity building sessions in partnership with FCI; as well as awareness-raising and strategic partnerships with FCI, the Nigerian Export-Import Bank, the Making Finance Work for Africa Partnership, the African Development Bank’s Fund for African Private Sector Assistance and the African Capacity Building Foundation.

Eric Intong, Afreximbank Senior Manager-Financial Institutions, Sovereigns and Corporates, stressed Afreximbank’s commitment to continue promoting factoring in Africa.

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He said that factoring is an alternative form of finance for SMEs, highlighting the role SMEs play in economic development.

Mr. Itong urged the conference participants to contribute to Africa’s development by engaging in factoring activities, either as financial institutions (commercial banks) or as standalone factoring companies; and encouraged them to leverage the support provided by Afreximbank, FCI and other partners.

Commenting on the conference, Peter Mulroy, Secretary General of FCI said: “We had significant interest from the participants to the conference, with over 125 Executives from the region.

“There were Q&As to better understand factoring mechanics, risk management, the legal perspectives, and the role of Import Factor and Export Factor…In summary it was one of the best conferences we ever held in Africa to date, with tremendous enthusiasm for the development of factoring in the area. I believe it brought an added value to the Receivables Finance industry in East Africa.”

Topics covered during the conference included: The evolution of factoring in the regions, opportunities and challenges faced; New horizons: The One-Belt-One-Road from Fuzhou to Nairobi; Legal and Regulatory Environment in East Africa and Regulatory Obstacles; and Challenges and opportunities on credit insurance in Africa.

The conference attracted more than 125 senior executives from factoring companies, banks and non-bank financial institutions, government agencies, consulting firms and IT providers.

Zimbabwean bankers schooled in Trade Finance 

The African Export-Import Bank (Afreximbank) has organised a training programme for Zimbabwean banks in an effort to enhance their technical skills in trade finance.

The documentary trade finance training, held in Harare from 24 to 29 February, attracted 44 participants from 15 commercial banks, one non-bank financial institution and the Reserve Bank of Zimbabwe.

The six-day programme consisted of two three-day sessions focused on the operational aspects of trade finance.

Topics covered included documentary letters of credit, bills for collection, bank guarantees, relevant International Chamber of Commerce rules, compliance issues related to trade finance, and risks in international business and ways of mitigating them.

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Case-studies of real-life scenarios were reviewed, and participants were taken through a practical review session on common errors that had been noticed in trade finance instruments issued by Zimbabwean banks in order to help them learn from the errors.

Based on the discussions and feedback received, the banks agreed to work toward designing a model letter of credit verbiage to cover key commodity imports. The model letter, which is expected to be endorsed by the Reserve Bank of Zimbabwe, will be adopted by all the banks going forward.

The training programme was organised in line with Afreximbank’s Trade Finance leadership pillar under which it seeks to play a leading role in matters relating to the development of trade finance in Africa, said Humphrey Nwugo, the Bank’s Regional Chief Operating Officer for Southern Africa at the opening.

“According to the World Trade Organisation, some 80 percent to 90 percent of world trade relies on trade finance,” he told the participants. “That is the opportunity we, as trade financiers, are sitting on – with anecdotal evidence pointing to a trade finance gap in Africa in excess of US$100billion.”

Also speaking, Okechukwu Ihejirika, Senior Manager, Trade Services-Afreximbank, said the training was aimed at helping participants to become better professionals in trade finance matters, while ensuring alignment with global best practice in terms of trade finance instruments originating from Zimbabwe.

The programme covered topics up to the intermediate level, with Afreximbank announcing plans to deliver an advanced level course to the group in future, and to hold sessions in other countries.

The programme is also part of the Afreximbank Academy through which the Bank is promoting knowledge in Africa.

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