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TitleUnleashing the Potential: Factoring solutions for SMEs in the AfCFTA market
Date of Publication2024
Number of Pages9
KeywordsAfCFTA, factoring, SMEs, developmental regionalism, regional value chains, trade integration, economic development
AbstractAbstract: The African Continental Free Trade Area (AfCFTA) Agreement, propelled by accelerated post-COVID implementation since January 2021, stands at a pivotal juncture, navigating phased negotiations toward liberalizing trade and addressing investment, competition, and intellectual property rights. This Policy Brief explores how factoring can serve as a critical financing tool, fostering Africa's structural transformation and SME participation in intra-regional and cross-border trade within the AfCFTA market. Enabled by supportive legal, regulatory, and financial frameworks, factoring offers immediate credit finance and liquidity to Africa's vast SME population, acting as catalysts for trade and economic integration. Furthermore, factoring can stimulate value-added manufacturing and services, nurturing regional value chains (RVCs) crucial for the AfCFTA's overarching goal of facilitating the free flow of goods, services, capital, and labor across diverse economies. Central to this discussion is the concept of developmental regionalism, which underpins the AfCFTA's systemic goals of promoting fair trade, stimulating productive capacity, and strengthening democratic governance. By providing continental public goods and fostering bonds of solidarity, the AfCFTA creates an enabling environment for factoring to thrive, amplifying SME growth and development across critical economic sectors. Drawing insights from the global factoring landscape, characterized by resilience and growth despite the challenges posed by the COVID-19 pandemic, this Brief underscores the potential of factoring to drive SME financing solutions within the AfCFTA context. It highlights the symbiotic relationship between factoring and developmental regionalism, emphasizing their collective role in advancing Africa's integration agenda and fostering inclusive economic growth.
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