The second day of African Export-Import Bank’s (Afreximbank) (www.Afreximbank.com) Annual Meetings (AAM 2024) that took place in The Bahamas from June 12 - 15 featured a highly informative Roundtable focusing on Factoring and Receivables Finance. This Roundtable brought together industry leaders, experts and stakeholders from Africa, the Caribbean Community (CARICOM) and beyond, to explore the multifaceted aspects of factoring and its implications for regional development, particularly within the Caribbean region. There were insightful discussions on the mechanics of factoring, its benefits, and practical strategies for implementation.

Mrs. Kanayo Awani, Executive Vice President of Intra African Trade & Export Development Bank, Afreximbank and Executive Committee Member of FCI opened the forum where she delivered the opening remarks. She was accompanied by Mr. John Rolle, Governor, Central Bank of The Commonwealth of The Bahamas.

Mrs. Awani noted that the objective of the Roundtable was to create awareness and offer insights into factoring as a viable financing solution for Small and Medium Enterprises (SMEs) in the CARICOM, noting that the SME situation in the region bore similarities to Africa. She explained that SMEs in the Caribbean are acknowledged as a vital yet struggling segment of the economies of the CARICOM countries. As the majority of firms in the region, they significantly contribute to the 70% of employment generated by the private sector, and account for about 40% of the region’s GDP; and just like in Africa, SMEs lack access to finance, to launch, develop, and grow.

Mrs. Awani said: “The cumulative outcome of Afreximbank’s initiatives in factoring in Africa over the last decade is an increase in affordable financing to SMEs as evidenced by the increase in factoring volumes in Africa to €48 billion in 2023, with a growth projection of €100 billion by 2030. The goal is to replicate a similar successful programme in the CARICOM.”

The Roundtable offered a sense of hope and optimism for the future of factoring in the CARICOM where the potential market volume is estimated between €7 billion and €10 billion. This envisions a future where SMEs can access competitively priced financing devoid of the burden of collateral requirements and high loan rejection rates. To achieve these objectives, she called for partnership and cooperation.

The Governor of the Central Bank of Bahamas welcomed the Afreximbank initiative, aimed at raising the level of awareness of factoring, receivables and supply chain finance in his country. He said factoring will help bring the much-needed working capital to local producers, service providers and exporters, especially SMEs who are the key drivers of economic growth globally.

He noted that the event was timely as it dovetails into his Government’s plan to put in place the right environment for factoring. The Government of The Bahamas adopted secured transaction reforms, supported by the World Bank and International Finance Corporation (IFC). This contributed to the enhancement of laws pertaining to factoring and receivables finance in The Bahamas.

He further advised that as part of this initiative, the Government also approved the adoption of a collateral registry, which will also incorporate a receivables registry, therefore helping to increase transparency and reduce fraud within commercial banks and NBFIs which are expected to provide factoring services against the receivables of domestic manufacturers and service providers in The Bahamas. 

Mr. Peter Mulroy, the former FCI Secretary General, shared valuable insights into factoring, covering its definition, types, evolution, advantages, and current global and regional trends. He presented on the topic “Insight into Factoring including its Advantages,” covering the history of factoring and receivables finance in general, and the development of factoring in the Caribbean region in particular. 

He noted that the Factoring Roundtable in The Bahamas was symbolic – following the very first factoring transaction dating back to the mid-18th century in Barbados during the era of common law factoring.  Modern factoring in the Caribbean only commenced in the 1980s. 

According to Mr. Mulroy, research shows that the industry’s overall growth rate exceeded 3.6% in 2023 compared to a high of +17.3% recorded in 2022, marking a major shift from the accelerated growth rates stimulated by GDP increases after the onslaught of the Pandemic, as well as significant global inflation experienced in 2021-2022. 

His research on factoring is still quite undeveloped in the Caribbean region but with the implementation of the right legal and regulatory framework, the development of an active factoring sector and the education and enlightenment of the proven benefits of factoring to businesses throughout the region, the upside potential is enormous, with an estimated market size of nearly €10 billion in factored volume by 2040.

The event featured an illuminating panel discussion moderated by Wole Famurewa, CNBC Africa Anchor. Panelists included representatives from the Bahamas Chamber of Commerce, Simplified Lending Bahamas, Woodhall Capital International Limited UK, Nigeria Export-Import Bank, and Afreximbank. Topics ranged from identifying key challenges of factoring to strategies for collaboration between stakeholders and the development of factoring in CARICOM.