Policy Brief No. 3 2024 - Unleashing the Potential: Factoring solutions for SMEs in the AfCFTA market

In view of its undoubted potential for the continent, the ambition and prospects of the AfCFTA open a new opportunity frontier for factoring and SMEs, but there are several inhibiting issues and challenges that have to be addressed if factoring is to facilitate trade and support SME growth. [...] Poor domestic institutional and governance conditions as well as the wider continental economic and political milieus have much to do with these phenomena, particularly concerning the poor levels of buyer and debtor information, political instability and con ict, dif cult business and trading environments, poor government support, and bureaucratic obstacles and red tape (Beck and Cull 2014). [...] Importantly, the use of digital technology in Africa could stimulate increased mobility, cross-border trade, and enhance the interconnectedness with other national and regional SMEs in the letter and spirit of the AfCFTA, and with it, create opportunities for digitally-driven economic growth (African Union 2020). [...] The ACBF in conjunction with Afreximbank's Factoring Unit, the AfDB's secretariat for Making Finance Work in Africa, the FCI secretariat, the AfCFTA secretariat, and with the support of the Africa Finance Corporation, the World Bank and IMF should explore the establishment of a 'Factoring Training and Education Fund for Africa SMEs' that expands the parameters of the FAPA grant for training and ed. [...] In this regard, Afreximbank's Factoring Unit, the AfDB's secretariat for Making Finance Work in Africa, the AfCFTA secretariat, and the Africa Finance Corporation with the support of and in partnership with the ACBF, FCI, UNECA, the UNDP, the World Bank and IMF should conduct a comprehensive econometric assessment to examine how different funding mechanisms flowing from the COP 28 process can be u.