Factoring and Supply Chain Finance (SCF) have been identified as critical, yet underutilized, tools for building resilient value chains and closing Africa’s massive SME financing shortfall.2 At Afreximbank’s recent annual Factoring Workshop in Abidjan, Côte d’Ivoire, the bank issued a clear challenge: Africa must dramatically scale up factoring activity to unleash SME-led growth.
Kanayo Awani, Executive Vice President of Intra-African Trade and Export Development at Afreximbank, noted that despite factoring volumes more than doubling from €21.6 billion in 2017 to €50 billion in 2024, current activity is still far below the continent’s potential.
The Economic Imperative
SMEs are the bedrock of Africa’s economy, accounting for over 90% of businesses and contributing more than 60% of employment and GDP.5 Yet, they face an estimated annual financing gap of US$300 billion.
To effectively bridge this gap and catalyze economic transformation, Awani stated the continent must scale factoring volumes to at least €240 billion, which is equivalent to about 10% of Africa’s GDP.
Factoring Defined: Factoring is the sale of a company’s unpaid invoices (accounts receivable) to a financial firm (a “factor”) at a discount for immediate cash.7 This mechanism converts future revenue into instant working capital, dramatically improving cash flow and often mitigating credit risk.
The Strategy for Scale
Achieving the ambitious €240 billion target will require a comprehensive, collaborative approach focused on four key areas:
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Increased Financing: Injecting more capital into the factoring ecosystem.
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Deeper Legal Reforms: Establishing robust, standardized legal frameworks across the continent.
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Expanded Training: Building technical expertise among financial service providers and businesses.
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Strong Industry Partnerships: Fostering collaboration between banks, factors, and development organizations.
Neal Harm, Secretary General of FCI, emphasized that factoring is critical to unlocking SME growth, particularly in environments plagued by long payment delays and collection challenges.
Both Afreximbank and FCI view the expansion of factoring and SCF as a key enabler for advancing the implementation of the African Continental Free Trade Area (AfCFTA), ensuring that SMEs—the primary drivers of intra-African trade—have the necessary liquidity to participate effectively.
