The African Export-Import Bank (Afreximbank) has urged African countries to legislate on motivational factors for growth of Small and Medium-scale Enterprises (SMEs).
A statement by the bank on Friday in Lagos said Ms Kanayo Awani, Managing Director of its Intra-African Trade Initiative, made the call in Nairobi.
Awani told participants at a sensitisaton seminar on “Model Law on Factoring’’ that it was time a legal framework for factoring was developed, using the law.
Factoring is a type of finance in which a business would sell its accounts receivable (invoices) to a third party to meet its short-term liquidity needs.
The seminar was organized by Afreximbank for the financial community, legal practitioners and legislators in East African countries.
“Strengthening legislation is critical to promoting the growth of factoring,” Awani, who is also the Chairman, Africa Chapter of Factors Chain International (FCI), said.
According to her, factoring can be the game-changer in terms of addressing the issue of limited access to finance faced by Africa’s SMEs.
Awani noted that a key part of Afreximbank’s Intra-African Trade Strategy was to facilitate greater contribution by SMEs to Africa’s regional value chains.
She said that the objective of the seminar was to present the salient provisions of the model law and to share ideas on the best approach for its adoption in East African countries.
She said that since 2011, Afreximbank had approved about 100 million dollars for factors in Africa.
Besides, the managing director said that the bank was currently reviewing 122 million dollars worth of credit lines for factoring institutions in Botswana, Burkina Faso, Cameroon, Egypt, Mauritius, Tunisia and Zambia.
On his part, Dr Enga Kameni of Afreximbank’s Legal Services Department said that significant provisions of the model law could be adapted and applied in various ways to refine local legislation on factoring.
The seminar brought together over 40 representatives of central banks, regulatory bodies, legislative authorities, commercial banks, law firms and factoring companies as well as members of parliament from East Africa.
The seminar follows earlier sensitization seminars organized in Abuja and Abidjan.
The Afreximbank Model Law on Factoring was launched on Oct. 23, 2016 in Cape Town, South Africa, during the seventh Annual Meeting of the Africa Chapter of FCI, on the sidelines of FCI’s annual meeting.
The document was drafted by Afreximbank based on recommendations from consultative meetings with factors, government and regulatory bodies, enterprises, legal experts and banks across Africa.
Afreximbank is the foremost Pan-African multilateral financial institution devoted to financing and promoting intra- and extra-African trade.
The bank was established in October, 1993 by African governments, African private and institutional investors and non-African investors. It has its headquarters in Cairo.
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