Related News

WTW promotes Creighton to trade credit and trade finance country head

Southern Africa trade dynamics: Insights from industry leaders

Fimbank names new CEO

Industry Perspectives: Injecting true transparency into collateral management

Factoring advocates hope new model law will boost market

Factoring houses are being urged to capitalise on the African growth story.

Speakers at Receivables Finance International’s first annual conference in Istanbul spoke of Africa as the next frontier of factoring, but warned that if factors are to succeed, they must go prepared.

Margrith Lütschg-Emmenegger, president of Malta-based trade finance bank Fimbank, told attendees and GTR that emerging markets, particularly those in Africa, will lead the world out of the current financial malaise and that the scene is being set for the introduction of factoring.

She pointed to the formation of a number of economic unions in Africa, including the Economic Community of West African States (Ecowas), the Common Market for Eastern and Southern Africa (Comesa), the East African Community (EAC) and the Southern African Development Community (SADC). With greater integration across the continent, barriers to factoring, such as tariffs and currency exchange difficulties, could become eroded.

Fimbank has launched a factoring facility in Egypt and is looking to partner with Ecobank to launch one in Kenya, too. Usually, said Lütschg-Emmenegger, the bank expects a new tool to turn a profit within two years of launching, but its Egyptian project took four years to offer a return. She hopes, however, that when competitors enter the market, it will lead to processes becoming streamlined and accepted.

Nedbank’s head of debtor management David Cory warned that those considering factoring in Africa should do so with caution. He recommended partnering with a local organisation, which will have more awareness of local customs and regulations.

Cory noted that the levels of bureaucracy in Sub-Saharan Africa can be crippling. To ship something from Durban to Mozambique, three hours’ drive away, requires the completion of some 1,600 forms. Such systems can be better negotiated with a local partner.

As well as complicated legislation, there is a lack of knowledge in Africa as to the benefits of factoring. There are huge infrastructural gaps too, which need to be addressed in order to rollout factoring across the continent.

Lütschg-Emmenegger, whose ambition is to have Fimbank factoring in 30 African countries, used Turkey as an example of a country which has recently embraced factoring, saying those looking to do so in Africa should follow the Turkish model.

Josep Selles, general manager of Eurofactor in Spain, pointed to the work being done by the International Finance Corporation (IFC), which is working to develop African factoring, with a view to getting finance to local SMEs. He also highlighted the efforts of Coface, who has launched direct factoring solutions across Africa, albeit of a quite simple nature. Coface, he said, has been approaching banks and offering to manage the complete factoring cycle. Progress has also been made in Angola, with Portuguese banks attempting to establish a factoring foothold in the country.

Selles urged international banks to follow the steps made by Francophonic and Lusophonic organisations in progressing factoring in former colonial territories. He expects to see progress made by South African banks, which have the geographical presence and continental experience to capitalise on the requirement and demand for factoring.