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African Export-Import Bank (Afreximbank) has reiterated the importance of factoring services in bridging the assessed gap in financing among small and medium-sized enterprises (SMEs) in Africa.
While admitting that the business model was scripted to address the challenges the SMEs face in accessing funding for business activities, the bank noted that it is also important to develop the model across Africa. In factoring, an exporter or supplier sells his accounts receivable or invoices at a discount to a third party, called a factor, in exchange for immediate cash with which to finance continued business.
The Managing Director of the Intra-African Trade Initiative of Afreximbank, Kanayo Awani, at a two-day factoring promotion seminar in Douala, Cameroon, said the effectiveness and potential of factoring services to support SMEs became even higher during periods of financial distress. She said that because of its unique features, factoring was well-suited for facilitating financial inclusion of SMEs.
