ACBF calls for promotion and adoption of Model Law on Factoring under AfCFTA

The Africa Capacity Building Foundation (ACBF) is calling for the adoption of Model Law on Factoring under the Africa Continental Free Trade Area with the sole aim of boosting trade among member countries.

The Model Law on Factoring developed and promoted since 2016 by the African Export-Import Bank (AfreximBank), a Development Partner of the African Capacity Building Foundation (ACBF) has become more relevant than ever, with the launch of the African Continental Free Trade Area (AfCFTA).

The law states in Article 1 in its scope of operation that, it applies to domestic or international assignments of domestic or international trade receivables made under a factoring contract. According to Law Insider, “factoring contract” means a contract concluded between one party (the client) and another party (the factor) pursuant to which the client will be the manufacturer or wholesaler of the goods or the provider of the service to which the receivable relates in Factoring Model Law version (4) 140221 LC.

In a statement copied to by ACBF with its partners AfreximBank, the ACBF stated that “lack of access to trade finance has been one of the impeding factors to trade, specifically for small and medium enterprises (SMEs) across the continent. While several innovative development finance solutions have been introduced to address the challenge, there are many businesses still facing limited access to trade finance mainly linked to perceived potential risks and losses”.

The AfCFTA which commenced its historic operations in January 2021 is yet to fully compose its architecture institutionally and policy ratifications. In a meet the press series with the Secretary General, Wamkele Mene he stated that not all countries on the continent must, would be ready before commencement and the AfCFTA must not be subjected to another yardstick of measurement or assessment when other trade blocs equally started small.

The statement added that “given the negative and disproportionate impact of COVID-19 on the finances of SMEs in Africa, there is an urgent need and an opportunity for factoring to be promoted to enable SMEs to grow their businesses, expand export capacity, increase intra-Africa trade as part of the post-COVID-19 recovery and resilience to build back better.”

According to the statement “the AfreximBank has reaffirmed its readiness to support factoring as a viable alternative source of trade financing for the SMEs in Africa saying, “given that access to finance remains a key constraint to operations of SMEs in Africa, availability of sustainable trade finance, is essential to propel the AfCFTA.”

The ACBF is the African Union’s Specialized Agency for Capacity Development following over 28 years of solid work, the Foundation is best placed to advise and support African countries, regional economic communities and institutions on decisive steps to take to develop the practical skills urgently required for the continent’s economic transformation.

By Fred Duhoe
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