Afreximbank introduces model law
The law is aimed at improving legal frameworks for factoring’s growth in AfricaThe African Export-Import Bank (Afreximbank) has introduced a model law on factoring to provide a benchmark for African national legislatures enacting arrangements aimed at fostering the growth of factoring activities across the continent. The Afreximbank Model Law on Factoring, which was unveiled in Cape Town, South Africa, on Sunday during the seventh Annual Meeting of the Africa Chapter of Factors Chain International (FCI), on the sidelines of FCI's annual meeting, 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, Kanayo Awani, Chairman of the Africa Chapter of FCI and Managing Director of Afreximbank's Intra-African Trade Initiative, predicted 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," said Ms. Awani, who spoke on behalf of the President of Afreximbank, Dr. Benedict Oramah. "We have placed the promotion of intra-African trade on the front burner of our current strategy and recognize the support which SMEs need as indirect exporters in regional value chains." Calling on regulators and lawmakers to treat the adoption of the model law with urgency, Ms. Awani pointed out that strengthening legislation was critical to easing the way collaterals were created, perfected and enforced as part of the financing provided to enterprises through factoring. Such strengthening, she added, provided credibility and business assurance to investors. 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. 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. In 2015 Africa accounted for only 0.7 per cent of the €2.373 trillion factoring transactions recorded across the world, with South Africa, Tunisia, Morocco, Egypt and Mauritius accounting for almost all the African transactions. Participating in the Sunday's launch ceremony were factoring regulators from across Africa, representatives of international law firms, members of the Africa Chapter and high level representatives of the FCI. The launch had been preceded by 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. Another seminar will take place in Nairobi in November. 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 cash with which to finance continued business.