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Published on September 27, 2018
The USAID Hub issued a grant to development financier Financial Access Commerce and Trade Services - Kenya Ltd (FACTS), which specializes in providing short-term working capital to SMEs, agri-businesses and other commercial entities that have limited access to finance from mainstream financial Institutions. FACTS bridges the trade terms that exist between buyers and sellers using technologically-enabled Supply Chain Finance (SCF).
The Hub's grant to FACTS is aimed at increasing the volume of staples trade across the East African Community (EAC) by providing grain traders and those in allied services with access to short-term working capital. This presents an opportunity to pilot a cross-border invoice financing arrangement. The grant is performance-based and will support 20 small and medium-sized enterprises (SMEs) across Kenya, Uganda and Tanzania. The total loan portfolio is expected to reach USD 2 million, with an average facility of USD 100,000. The grant to FACTS is a risk share arrangement that is expected to expand the risk appetite of FACTS and other financial institutions to lend more to underserved sectors. It also forges a drive to new markets; as a result of this grant, FACTS is now willing to enter the Tanzanian market.
Intra-regional trade in Africa is the lowest globally, accounting for only 15% of the continent’s trade value. This is also true for grains and other food staples, which have limited movement from surplus to deficit areas. In addition to systemic issues such as logistics, standards harmonization and trade export bans, the biggest issue affecting cross border grain trade is the lack of working capital finance. Traders, millers and warehouses struggle with the documentation required to access the working capital from banks. Many do not have high-quality business plans, financial models, accounting records or evidence of corporate governance structures. Without this supporting documentation, even legitimately successful businesses cannot access financing. Continue reading...
Source: USAID East Africa Trade Hub
