Affacto CEO: Access to Finance Key to Boosting MSME Competitiveness in AfCFTA Era

By : Muriel Edjo 

Date : lundi, 12 février 2024 17:46

In Africa, the fintech landscape is dominated by payment and money transfer startups. But there are a few outliers. One such company is Affacto, a platform that specializes in financing the cash flow of SMEs involved in import-export between Africa and Europe. Affacto was founded by Aïssata Naba Coulibaly, a Malian entrepreneur who spoke with We Are Tech Africa about this niche market and what makes her company unique.

We Are Tech: When we talk about the trade supply chain in Africa, who are we talking about exactly?

Aïssata Naba Coulibaly: The trade supply chain in Africa generally encompasses various sectors of activity such as production, processing, distribution, retail, etc. The specific links involved can vary depending on the sector.

However, in general, the supply chain includes key sectors from the manufacturing of products to their availability on the market for consumers. Each link within these sectors can therefore represent an actor in the African trade supply chain.

WAT: Which of those specific needs does Affacto address?

ANC: Affacto provides factoring services. Factoring is a financing solution that enables businesses to obtain quick cash advances by selling their unpaid invoices. This debt collection is managed by a factor, a specialized credit institution.

In addition to playing the important role of improving cash flow in a supply chain where costs can occur at different stages, factoring also helps to reduce financial risks. By assigning receivables to a factoring company, the company can reduce the risks associated with late payments or bad debts, thus providing some financial protection. Financial cycles are also accelerated. Factoring can help accelerate financial cycles by providing immediate liquidity, allowing businesses to pay their suppliers faster and maintain smooth operations in the supply chain. Optimization of supplier relationships is not to be forgotten.

By having liquidity more quickly, companies can negotiate more advantageous payment terms with their suppliers, thus strengthening relationships within the supply chain. It should be noted that factoring offers a certain financial flexibility by allowing companies to raise funds according to their needs, which can be crucial in a dynamic business environment. Overall, factoring plays a key role in providing financial solutions that contribute to the efficiency and stability of the supply chain.

WAT: The United Nations Conference on Trade and Development (UNCTAD) notes the emergence of digital platforms that facilitate access to finance for supply chain actors. In a context where traditional commercial banks are still at the heart of credit in Africa, what selling points do you put forward to meet such success? 

ANC: We have, first and foremost, increased accessibility. Digital platforms can broaden access to finance by using innovative technologies, thus reaching a wider range of supply chain actors, including small and medium-sized enterprises that may face difficulties in obtaining credit from traditional banks. Our processes are simplified.

By leveraging technological solutions, digital platforms can simplify the application, evaluation, and disbursement processes for funds, thus accelerating the financing cycle. This can be particularly attractive for businesses seeking quick disbursements.

It is worth noting that digital platforms can use algorithms and advanced data analytics to assess credit risk more accurately, offering a more flexible and individualized approach compared to traditional bank credit models.

Digital platforms can also contribute to financial inclusion by targeting segments of the population that are generally underrepresented in the traditional financial system, thus promoting broader participation of supply chain actors.

In summary, digital platforms can differentiate themselves from traditional banks by leveraging technology to improve accessibility, simplify processes, use advanced data analytics, and promote financial inclusion, thereby contributing to meeting the diverse needs of supply chain actors in Africa.

WAT: Micro and small businesses (MSMEs) often lack the financial traceability banks require to qualify for credit. How do you ensure that your financial support to MSMEs will be recovered since they form a sizeable part of your clientele? 

ANC: To address the challenges of financing micro, small, and medium-sized enterprises (MSMEs), financial service providers, including those specializing in factoring, have developed a variety of mechanisms to mitigate the risks associated with their limited financial traceability.

One approach is cash flow analysis. Financial service providers can conduct in-depth analyses of MSME cash flows to assess their ability to repay financing. This approach can be less reliant on traditional credit history.

The use of alternative data is another solution. Factoring platforms can leverage alternative data sources, such as transaction data, payment history, or invoice information, to assess the creditworthiness of MSMEs, in addition to or as a substitute for traditional credit criteria.

More flexible assessment models that consider non-traditional indicators can also be adopted to adapt to the realities of MSMEs that may not have complete financial traceability.

Factoring companies can implement robust guarantee and collection mechanisms to minimize risks. This may include personal guarantees, receivables assignments, or other collateral forms.

By implementing these approaches, financial service providers can help mitigate the risks associated with MSME financing, thereby promoting financial inclusion and supporting small-scale supply chain actors.

WAT: The UNCTAD report "The Potential of Africa to Capture Technology-Intensive Global Supply Chains" indicates that Africa only contributed 1.9% to the $2.2 trillion global supply chain finance in 2022. What are the obstacles hindering the continent's progress?

ANC: The financing of trade supply chains in Africa is hampered by several factors, including the lack of adequate financial infrastructure, complex legal and regulatory frameworks, as well as challenges related to trust and transparency in commercial transactions. Additionally, issues related to financial market maturity and financial literacy also play a role in this context.

WAT: Given the challenges that hinder access to finance for trade supply chain actors in Africa, what innovative solutions can be implemented to address these challenges and transform the financing landscape?

ANC: It is essential to develop a collaborative vision at all levels to support supply chain financing at all stages. At Affacto, we have launched the Affacto Flow service, which allows us to finance suppliers, clients, freight forwarders, and logistics companies on the third-party holding side. We have decided to bring all stakeholders together in the same place to enable them to collaborate at all levels of the chain.

WAT: With the AfCFTA, a market of 1.4 billion people in Africa, what opportunities could unlock access to finance for trade supply chain actors?

ANC: The effectiveness of trade supply chain financing in the context of the African Continental Free Trade Area (AfCFTA), which brings together 54 African countries, can contribute to market expansion for businesses.

With the continental market, businesses will have access to more orders, which will support their production, distribution, and marketing activities. Logistics and transportation companies will be able to capitalize on financing to develop and improve their infrastructure across the continent, facilitating the efficient movement of goods.

SMEs make up a significant portion of the supply chain actors in Africa. The targeted financing they could benefit from would help strengthen their production capacity, market access, and compliance with international standards. The funds could even be used to develop and adopt technological solutions to improve their supply chain management, increase their visibility, and facilitate their transactions within the AfCFTA.

It is important to note that financing could also be used to set up training programs to strengthen the skills of supply chain actors, particularly in regulatory compliance and best business practices.

In summary, in the era of the AfCFTA, access to finance for SMEs can provide trade supply chain actors in Africa with the ability to catalyze their efficiency, competitiveness, and growth. This will promote further economic integration on the continent.

WAT: Currently, Affacto operates in Mali, Senegal, Côte d’Ivoire and Togo. What are its short-term plans for expansion?

ANC: We aim to establish strategic partnerships with banks, debt funds, other fintech companies, and all other supply chain actors.

We are currently raising funds and plan to expand our services to other West African countries and explore the two Congos. We are in discussions with a country in the sub-region to set up an innovative mechanism that will allow SMEs that win public contracts to finance their principals through the financial market.

Interview by Muriel Edjo 


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