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| | | Title | Factoring as a game changer: Empowering SMEs in the AfCFTA Context | | Author | ACBF | | Date of Publication | 2024 | | Publisher | ACBF | | Abstract | The African Continental Free Trade Area (AfCFTA) Agreement holds significant promise for driving trade and economic integration across the continent, especially amidst a volatile global geopolitical landscape. This paper underscores the urgent need for effective implementation of the AfCFTA, given Africa's limited participation in global value chains, fragmented trade policies, and high informal trade levels. Small and Medium Enterprises (SMEs) are vital for the success of the AfCFTA, yet they face substantial financing challenges, particularly the "missing middle" category. This group struggles to access suitable financing, being too large for microfinance but too small for traditional lenders and investors. Factoring emerges as a potential game changer for SMEs in the AfCFTA context. By offering accessible and affordable financing solutions, factoring addresses the immediate liquidity needs of SMEs, facilitating their participation in regional value chains and intra-African trade. The paper examines the structural impediments hindering SME financing, including information asymmetries and the dominance of traditional banking institutions. It proposes policy interventions to enhance SME access to finance, leveraging factoring as a key tool for bridging the "missing middle" financing gap. Through case studies and empirical analysis, the paper highlights the benefits of factoring, including improved cash flow management and reduced credit risk. It advocates for collaborative efforts among stakeholders to promote factoring as an integral component of the blended finance toolkit, empowering SMEs to capitalize on the opportunities presented by the AfCFTA. In conclusion, the paper underscores the transformative potential of factoring in catalyzing SME growth and facilitating greater economic integration within Africa. It calls for concerted action to create an enabling environment for factoring adoption, ensuring that SMEs can fully leverage the benefits of the AfCFTA for sustainable development across the continent. | | Filesize | 1570138 MB | | File Format | PDF | | [ View / download original document ] |
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