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FRA?s Deputy Chairman: Africa should consider the advantages of factoring to enhance Intra-African Trade – Wednesday 25/9/2019

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• El-Nashar: The volume of factoring in Africa jumped to Euro 22.2 billion in 2018

Judge Khaled El-Nashar – FRA’s Deputy Chairman asserted that African Union (AU) countries are at an important stage of increasing trade, investment and entrepreneurship opportunities driven by ambitious young people , bold and encouraging government policies that will achieve Africa’s  aspirations.

He points to the importance of factoring as one of the non-banking financing instruments and its impact on the economy as it plays an effective role in financing and developing small and medium enterprises. This will consequently promote governments’ efforts towards achieving financial inclusion, transitioning to the formal economy and enhancing governance among SMEs. He adds that factoring is considered as the best means of working capital finance that is reflected positively in increasing the rate of working capital turnover and positively affects the movement of international trade.

This came during the opening session of a Conference on International Factoring to Enhance Intra-African Trade organized by the Egyptian Factoring Association (EFA), the GIZ and the African Export-Import Bank (Afreximbank).
Conference sessions held under the patronage of Dr. Mohammed Omran – FRA’s Chairman. It discussed enhancing the Potential Growth of Intra-African Trade. In addition, Credit Insurance Role to Strengthen the International Factoring and international best practice will be shared with participants, focusing on international factoring.

El-Nashar said that despite the enormous opportunities achieved by factoring globally, it did not grow in a manner befitting the African continent, where the volume of factoring activity accounted for about 1% of the African national product and Africa’s share of 0.8% of the global factoring market. However, Africa’s factoring activity has significant growth opportunities due to increasing demand. In Africa, the volume of factoring has grown from Euro 14.9 billion in 2009 to Euro 22.2 billion in 2018.This growth is a pillar towards supporting intra-African trade.

FRA’s Deputy Chairman added that factoring performance indicators in Egypt have evolved significantly. He pointed out that the volume factoring jumped from 975 million pounds in 2011 to 10.6 billion pounds in 2018 with an average annual growth rate ranging between 30% -40%. He emphasized that this reflected the remarkable development that occurred as a result of the readiness of the Egyptian market and due to FRA’s support, noting that the number of companies doubled from two companies in 2011 to 10 companies in 2019.

El-Nashar pointed out that the volume of international factoring activity represented 17% of the total of factoring activity in Egypt. Thus, this was the highest percentage of international factoring in the African continent, which reflects the importance of international factoring role to the Egyptian economy. In addition, he emphasized that FRA aimed to achieve a growth in the volume of factoring activity in Egypt to exceed 30 billion pounds by the end of 2022.  .

It is worth mentioning that last year witnessed the issuance of financial leasing and factoring law no. 176, the first Law dealing specifically with factoring.  The said Law regulated many axes; most notably, licensing rules, governance and non-conflict of interest rules, capital adequacy standards and tax benefits. In addition to, the said Law enhanced company’s work in terms of human resources and technological structure that ensure the existence of a strong financial institution be engaged in factoring activities at a steady pace. Also, the law regulated some provisions related to international factoring which will encourage exporting  through allowing the exporter to borrow part of the importer’s debt before being paid in full and therefore improves the exporter’s cash flow.

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Regulator Information

Abbreviation: FRA
Jurisdiction: Egypt

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