CAIRO. – The African Export-Import Bank (Afreximbank) has introduced a model law on factoring to provide a benchmark for African legislatures to enact rules aimed at fostering the growth of factoring activities across the continent.The move had become necessary as a way to boost the continent’s share of the €2,373 trillion global transactions, which Africa accounted for a paltry 0,7 percent in 2015.

Besides, there was the need to broaden country participations in the market that is nearly left for South Africa, Tunisia, Morocco, Egypt and Mauritius in all the region’s transactions. In factoring, an exporter or supplier sells his accounts receivable or invoices at a discount to a third party, called a factor, in exchange for immediate to finance other businesses.

To advance factoring in Africa, Afreximbank has been providing lines of credit to factors, creating awareness and building capacity among key players and assisting in the creation of facilitative infrastructure.

The launch came on the heels of two seminars, organized by Afreximbank in Abuja and Abidjan earlier in the year, which came up with road maps for implementing local legal frameworks inspired by the model law.

The Afreximbank framework tagged “Model Law on Factoring,” was unveiled in Cape Town, South Africa, on Sunday, at seventh yearly meeting of the continent’s chapter of Factors Chain International (FCI).

The bank said it is based on recommendations received from consultative meetings with factors, government and regulatory bodies, enterprises, legal experts and banks across Africa and the world.


Launching the model law, the chairman of the Africa Chapter of FCI and managing director of Afreximbank’s Intra-African Trade Initiative, Kanayo Awani, raised the hope that the document would have profound impact on the way Small and Medium-sized Enterprises (SMEs) were financed in Africa.

“Its development impact will be phenomenal, facilitating access to finance for excluded small and medium-sized business,” she said.

Speaking on behalf of the president of Afreximbank, Dr Benedict Oramah, she added: “We have placed the promotion of intra-African trade on the front burner of our current strategy and recognise the support which SMEs need as indirect exporters in regional value chains.”

She called on regulators and lawmakers across the continent to treat the adoption of the model law with urgency, as such strengthening provides credibility and business assurance to investors.

According to her, strengthening legislation was critical to easing the way collaterals were created, perfected and enforced as part of the financing provided to enterprises through factoring.

The model law defines and protects the rights of parties to factoring transactions, including those relating to following assignments, nullification of bans on assignment, exclusion of certain receivables, rights between factors and clients, debtor protection, competing rights to receivables and international factoring. – Todayng

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