Policy Brief No. 2 2024 - Factoring as a game changer:

The passage of the AfCFTA and the prospects it inaugurates for Africa's trade integration must, however, be located in a fast- changing, volatile, and mercurial global context of geo-political fragmentation, disruptive trade and commercial relations, environmental degradation caused by climate change, and neo-mercantilist and protectionist tendencies in the West. [...] However, if factoring is to be a gamechanger in empowering SMEs in the context of the AfCFTA, it is important to understand the problematic terrain in which they have to operate in Africa, especially the “missing middle” category and how its different constitutive elements and operational dynamics can be understood; and the obverse of this, is the difference that factoring could make as a nancing. [...] Using the UNDP/ECOWAS guide as an instructive medium, the ACBF with the support of the AfCFTA secretariat, and relevant agencies of UNECA, the AUC, and the AfDB should develop and distribute such manuals for SMEs across all RECs but in all languages of the AU. [...] ● The 'missing middle” dimension: The Afreximbank's Factoring Unit with the assistance of the ACBF, the secretariats AfCFTA and the AfDB's Making Finance Work in Africa should conduct a comprehensive survey to get a better empirical handle on the quantitative representation of the “missing middle”. [...] While challenges remain and are material to the future success of the AfCFTA in knitting together a continent that is united in its diversity, factoring paves the way for a radical overhaul of the nancing and credit de ciencies and defects that have undermined the progressive role of SMEs in poverty reduction and economic growth.