The International Finance Corporation (IFC) has partnered with working capital solutions provider C2FO to develop its first supply chain finance platform dedicated to small businesses across Africa.
Through the partnership, development finance institution IFC will work with US-headquartered C2FO to develop, test and deploy a digital tool that connects micro, small and medium-sized suppliers and their anchor buyers with financial institutions.
Financial institutions will be able to use the platform to provide early payment to suppliers for approved invoices, giving them immediate access to cash, IFC says.
It will use buyers’ credit ratings to ensure those suppliers benefit from reasonable rates, and will leverage technology developed by C2FO such as the company’s dynamic discounting model.
IFC says it hopes the initiative will “increase the availability of affordable finance and strengthen local enterprises and supply chains across Africa”.
Small businesses account for around 80% of employment on the continent, but those companies “struggle to obtain working capital through the traditional financial system, constraining the growth of firms”, it says.
“Such financing is critical for helping build more sustainable economic ecosystems, and for strengthening food security.”
IFC adds the project is its “first dedicated supply chain financing facility in Africa for smaller businesses”.
“IFC is committed to addressing the financing challenges faced by SMEs in Africa. By partnering with C2FO, we aim to unlock significant funding opportunities for these enterprises, enabling them to thrive and contribute to economic growth,” says Makhtar Diop, IFC managing director.
Africa’s supply chain finance market has experienced rapid growth in recent years, but in volume terms remains tiny compared to more mature markets in Asia and Europe, according to UN research published last year.
The programme will initially target the Nigerian market.
C2FO estimates that a national supply chain finance programme in the country could unlock as much as US$25bn per year in financing for small businesses.
Founder and chief executive Alexander Kemper says Nigeria has “an especially promising small business sector”, and that it is “only natural that this work begins in Africa’s most populated country”.
Nathalie Louat, IFC’s director of trade and supply chain finance, told GTR earlier this year that supply chain finance is a “very significant area of growth” for the institution, and that it is pushing for greater uptake of the product among local banks in developing markets.
It has struck a series of deals with lenders in recent months, including international banks such as Citi and HSBC, to support the expansion of supply chain finance offerings.
