Addressing the finance gap for SMEs across Africa will require the continent’s factoring volumes to leap by 380%, the African Export-Import Bank (Afreximbank) has said.
While Africa’s factoring volumes have more than doubled between 2017 and 2024, jumping from €21.6bn to €50bn, Afreximbank said they would need to reach “at least €240bn” to plug the gap.
Small businesses have historically found it difficult to access trade finance due to high borrowing costs driven by perceived risk, a lack of financial documentation and slow approval processes.
The African Development Bank estimated in 2019 that the shortfall between the demand and supply for trade finance had grown to around US$80bn.
Kanayo Awani, executive vice-president, intra-African trade and export development at Afreximbank, told attendees at the agency’s annual factoring workshop that current factoring activity was “significantly below Africa’s transformative potential”.
“Although SMEs account for more than 90% of Africa’s businesses and over 60% of employment and GDP, they continue to face a financing gap estimated at US$300bn [€257.6bn] annually,” she said.
“To catalyse SME-led growth, Africa must scale factoring volumes to at least €240bn, equivalent to about 10% of the continent’s GDP,” Awani said. “Achieving this will require increased financing, deeper legal reforms, expanded training and strong industry partnerships.”
Neal Harm, secretary general of FCI, the global factoring industry association, added that factoring and supply chain finance are critical to unlocking SME growth in Africa.
He called for “practical solutions, strong partnerships and collaborative action”.
The factoring market in Côte d’Ivoire, where the workshop took place, was identified as having significant potential for expansion.
Côte d’Ivoire’s factoring and supply chain finance sector could reach US$5bn, Afreximbank said, but just 12% of SMEs “currently seek working capital from formal financial institutions”.
Last year, Harm told GTR that “advocacy and education” was needed in Sub-Saharan Africa to promote the benefits of factoring.
“To me, in most African nations, we’re at a point of figuring out how it works, what needs to be in place, what regulations are required and building out credit and underwriting teams, for example,” he said.
