Commercial Bank of Africa (CBA) has entered into a partnership with Ennovative Capital (ECap), a financial technology firm, to launch an online platform to facilitate the immediate payment of goods and services delivered by suppliers.
The platform, referred to as Supply Chain Financing (Reverse Factoring), will allow corporate buyers to approve and submit their invoices to the CBA, which in turn will pay the suppliers with recourse to the corporate buyers. This way, the suppliers will have access to early payment against their invoices.
According to Jeremy Ngunze, chief executive of CBA Kenya, the platform will assist by ensuring the participating firms have access to liquidity, which in turn will help many firms, especially SMEs, by availing working capital to them faster. The model allows participating SMEs to incur debt only when borrowing for expansion, rather than on the routine working capital.
“We have leveraged technology and teamed up with a provider of financial guarantees, to address some of the key concerns affecting business today. In particular, this solution will spur growth among Small and Medium Enterprises (SMEs) by availing working capital faster to enable them finance new projects,” Ngunze said.
According to Kefa Nyakundi, ECap CEO, the solution provides a marketplace for SMEs supplying goods and services to creditworthy buyers to trade their approved invoices without the need for the SME suppliers to undergo credit assessment.
Pan-African non-bank financier African Guarantee Fund (AGF) will also be part of the partnership, as they will share risks through financial guarantees to CBA. According to Felix Bikpo, CEO at AGF, in conjunction with CBA, they intend to track and document the economic impact arising from this development.
The platform could not come at a better time as according to a report done in 2017, late payments for goods and services is a common problem for SMEs in the country. Retailers usually take up an average of 5 to 7 months in order to pay suppliers.
