Through its partnership with African Export-Import Bank, Fiducia is providing financing to SMEs in Africa through factoring and actively raising awareness about its benefits among African businesses.

Fiducia,   a technology-enabled platform built to power supply chain financing and support the development of small businesses in Africa, is partnering with African Export-Import Bank (Afreximbank) to provide additional liquidity for small businesses in Africa through factoring. Factoring provides SMEs with immediate access to cash flow by converting their unpaid invoices to funds.

Small and Medium Enterprises (SMEs) are the driving force of economic development in Africa, accounting for 90% of all businesses, 50% of employment and 40% of GDP across the continent. While SMEs contribute the majority of economic output and employment generation in Africa, they often lack access to financing they need to strengthen their businesses. Only 20% of African SMEs have a line of credit. 

The partnership between Afreximbank and Fiducia seeks to address this concern through factoring. “Fiducia is actively raising awareness about factoring and its benefits among African businesses,” Imohimi Aig-Imoukhuede, the CEO of Fiducia, told TechCabal. “Through joint promotional and educational campaigns, we aim to highlight the advantages of factoring and provide the necessary knowledge to potential users.” 

Fiducia’s move to reduce the financial gap through factoring is a novel solution and the company is currently testing the waters in Nigeria. According to the CEO, the startup is working with developmental finance institutions and legal firms to “develop a blueprint for the sector” while also advocating for the adoption of sector-friendly policies and regulations. “By collaborating with these stakeholders, we can create an enabling environment for factoring to thrive and expand its reach in Nigeria and across the continent,” he said.

How it works

The factoring process, which Fiducia aims to implement through its marketplace, involves SMEs supplying goods to corporate buyers. The SMEs upload invoices, which are validated and approved by the corporate buyers. Funders then bid on the invoices, and Fiducia selects the successful funder. Fiducia sends funding instructions to the funder, and the SMEs receive funding. On the due date, the corporate buyers pay the funder. Fiducia facilitates the entire process, ensuring efficient transactions and business growth. “The goal is to facilitate smoother cash flows, improve inventory management, and enhance overall financial stability within the supply chain ecosystem,” Aig-Imoukhuede told TechCabal.

Fiducia’s novel approach represents a way forward for financing SMEs in Africa as it helps financiers substitute the higher level of risk associated with the smaller SMEs and replaces this with lower risk of larger more established businesses. To protect financiers on its platform. Fiducia provides them with market and sector data to help them to filter out those that do not conform to selected criteria. Concentration risk poses another challenge to financiers. Aig-Imoukhuede asserts that Fiducia helps financiers mitigate concentration risk by allowing financiers on Fiducia’s platform to easily diversify their asset portfolios. “By employing a proactive and risk-aware approach, we will support the sustainability and resilience of our factoring solutions,” he added.

Future Plans

While Fiducia is testing the waters in Nigeria, it aims to “make factoring a convenient and reliable financing option for African businesses,” according to the CEO. Aig-Imoukhuede stated that Fiducia plans to deepen its presence across multiple markets on the continent through strategic partnerships.” By establishing strategic partnerships, we will leverage existing networks and expertise to reach clients (even SMEs in remote areas),” he said. 

“Ultimately, our long-term goal is to contribute to the growth and development of African economies by empowering SMEs, fostering financial inclusion, and driving economic prosperity through factoring,” he concluded. 

Editor’s note: We incorrectly termed Fiducia an investment firm. We have now corrected that to reflect that they’re a technology-enabled platform built to power supply chain financing and support the development of small businesses in Africa. 

Faith Omoniyi Intern Reporter

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