Turning Invoices into Growth: Factoring emerges as key tool to unlock SME finance, says BoU Deputy Governor

Uganda is pushing to expand alternative financing tools such as factoring and receivables finance to unlock credit for businesses, with the Bank of Uganda positioning these instruments as critical to closing Africa’s persistent trade finance gap.

In a keynote address at the Africa Regional Conference on Factoring, Receivables Finance and Credit Insurance in Kampala, Deputy Governor Michael Atingi-Ego underscored the growing importance of non-traditional lending mechanisms in supporting small and medium enterprises (SMEs) and boosting intra-African trade.

The conference, organised by African Export-Import Bank and FCI, brought together policymakers, financial institutions and industry players to explore how innovative financing solutions can strengthen Africa’s financial ecosystem.

Bridging the Trade Finance Gap

Atingi-Ego highlighted that many African businesses, particularly SMEs, continue to face limited access to working capital due to rigid lending requirements and underdeveloped credit markets.

Factoring, which allows businesses to convert unpaid invoices into immediate cash, is increasingly being recognised as a practical solution to these challenges. Across the continent, such tools are gaining traction as viable complements to traditional bank lending.

He noted that improving access to liquidity is essential for enabling firms to participate effectively in regional and global value chains, especially under frameworks such as the African Continental Free Trade Area (AfCFTA).

Beyond Traditional Lending

The Deputy Governor emphasized the need for Africa’s financial systems to evolve beyond conventional collateral-based lending, arguing that receivables finance and credit insurance can help de-risk lending while expanding access to credit.

Experts at the conference echoed this view, noting that factoring is increasingly seen as “a necessity” for businesses that need immediate liquidity to remain competitive.

The shift toward alternative financing is also being driven by the need to support domestic and cross-border trade, particularly as African economies deepen integration.

Building Stronger Financial Ecosystems

Atingi-Ego pointed to the importance of developing supportive legal and regulatory frameworks to enable the growth of factoring markets. Without clear rules governing receivables financing, he noted, uptake of such instruments remains limited.

Participants at the conference discussed the role of digitalisation, credit insurance, and regulatory reforms in scaling up these solutions across the continent.

The event also served as a platform for knowledge exchange among regulators, insurers, and financial institutions, reflecting a growing consensus that collaboration is essential to building sustainable financing systems.

SME Growth at the Centre

At the heart of the discussion was the role of SMEs, which form the backbone of most African economies but remain underserved by traditional financial institutions.

By unlocking working capital tied up in receivables, factoring can enable businesses to expand operations, meet orders, and participate more actively in trade.

Analysts say that as Africa moves toward a more integrated market, innovative financing tools will play a pivotal role in driving industrialisation and economic growth.

A Strategic Shift

The conference signals a broader shift in thinking among policymakers and central banks — from reliance on traditional lending models toward more flexible, market-driven financing solutions.

For Uganda and the wider region, Atingi-Ego’s message was clear: strengthening access to finance, particularly for SMEs, will be central to unlocking trade, boosting competitiveness, and sustaining long-term economic transformation.

As discussions continue, the challenge now lies in translating policy dialogue into practical reforms that can scale factoring and similar instruments across African markets.