How factoring can improve access to finance in Africa

Small businesses in Africa have long struggled with limited access to finance, hindering their growth and potential. However, a financial service known as factoring is emerging as a critical solution to address this issue. Olivia Zank, the founder and CEO of Benefactor's, explains that factoring services offer a working capital product that allows businesses to receive advances on invoices, providing them with the necessary funds to continue their operations. In a recent interview with CNBC Africa, Zank highlighted the challenges faced by businesses in Rwanda and the broader region, emphasizing the importance of addressing the liquidity challenge. Many businesses, despite being profitable, often struggle with cash flow issues, leading to delays in payments and difficulties in meeting financial obligations such as salaries and taxes. Benefactor's aims to tackle this issue by providing businesses with the necessary capital to support their growth and expansion. Zank noted that while the company has made an impact, there is still work to be done in addressing the broader access to finance challenges across Africa. The feedback from customers has been positive, with many businesses benefiting from the services offered by Benefactor's. By alleviating financial stress and enabling business growth, factoring has become a valuable tool for entrepreneurs in Rwanda and beyond. Looking ahead, Benefactor's plans to scale its operations beyond Rwanda, potentially expanding into markets such as Zambia, Malawi, and Mozambique. Zank also expressed optimism about introducing new working capital products to further support businesses in the region. In assessing government policies, Zank praised Rwanda's regulatory environment for its stability and predictability, highlighting the support received from the central bank in navigating the regulatory landscape. She emphasized the importance of a conducive regulatory framework for the financial sector, noting that it can facilitate business growth and investment. As Benefactor's continues to explore opportunities for expansion, regulatory considerations will play a crucial role in determining future markets. Overall, factoring services are poised to transform the access to finance landscape in Africa, empowering small businesses to thrive and contribute to economic development.