By Thierno Seydou Nourou Sy
Banker
Founder of Nourou Financial Consulting (NFC)
Dakar, Senegal
www.nouroufinancial.com
In the West African Monetary Union (UMOA), factoring and leasing are not new concepts or legally non-existent instruments. They are recognized by the community framework and are included in the classification of financial institutions. Several banks and specialized institutions offer them.
The Central Bank of West African States (BCEAO) and member states have laid down structuring regulatory foundations.
The question is no longer about their existence.
It is about their scale and macroeconomic impact.
While these instruments are slowly progressing in our region, the rest of the world is using them as major financing levers for the real economy.
A striking numerical contrast
On a global scale, the annual volume of factoring now exceeds 3,000 billion euros. In Europe, it represents on average 10% to 15% of GDP in the most mature economies. In France, the annual factoring volume is around 400 billion euros, representing more than 15% of GDP.
In China, the leasing market has become one of the largest in the world, heavily supporting the industrialization and modernization of SMEs.
In sub-Saharan Africa, however, factoring still represents less than 1% of GDP in most countries.
In the UEMOA space, the contrast is even more visible.
SMEs represent more than 80% of the formal entrepreneurial fabric and contribute significantly to employment and value creation. Yet, according to estimates by the International Finance Corporation (IFC), the financing gap for SMEs in sub-Saharan Africa exceeds 300 billion dollars.
In the UEMOA, the private sector credit rate remains structurally lower than that observed in comparable emerging economies, oscillating around 25% to 30% of GDP, compared to over 50% in several middle-income economies.
This deficit is not only quantitative. It is structural.
The real need: financing flows, not just balance sheets
The majority of the needs of UEMOA SMEs do not exclusively concern classical investment credit. They concern:
– Working capital financing;
– Rapid mobilization of receivables;
– Acquisition of productive equipment;
– Technological modernization.
This is precisely the natural terrain of factoring and leasing.
Factoring transforms an invoice into liquidity. In economies where payment terms can exceed 60 to 90 days, the ability to immediately mobilize a receivable profoundly changes a company’s financial dynamics.
Leasing allows an SME to use equipment without immediately immobilizing its own funds. Rents are spread out and aligned with the cash flows generated by the asset.
In both cases, financing is based on real flows – commercial receivables or productive assets – and not only on often insufficient collateral.
For banks, this means a risk approach more anchored in the real economy, more diversified, and potentially less concentrated.
The UEMOA has laid the foundations: a strategic asset
It is important to emphasize this.
The community regulatory framework explicitly recognizes these activities. The BCEAO has integrated factoring and leasing into the nomenclature of financial institutions. Prudential supervision is ensured by the Banking Commission.
Texts have been developed to secure these practices.
This foundation is a major asset. It positively distinguishes the UEMOA in the region.
But a legal framework, no matter how structuring, does not automatically create a deep market.
Today, the combined outstanding balance of leasing and factoring in the UEMOA area remains modest compared to the size of the economies concerned. In several member countries, these products represent a marginal part of overall business financing.
We are still far from a systemic threshold.
Barriers: a shared responsibility
To move forward, we must look at reality with lucidity.
Firstly, execution procedures remain lengthy in case of disputes. Judicial speed is a determining factor for the confidence of funders.
Secondly, the assignment and recovery of receivables can still raise practical uncertainties.
Thirdly, the recovery and resale of assets in leasing remain complex in poorly organized secondary markets.
Fourthly, there is still a persistent lack of knowledge on the part of SMEs. Factoring is sometimes perceived as a sign of weakness, and leasing as disguised indebtedness.
Finally, on the banking side, the industrialization of these products remains uneven. They are not always integrated as major strategic axes, with specialized teams and analysis systems based on flows.
As a banker and consultant, I believe that we collectively have a responsibility.
A regional competitiveness issue
In a context marked by international competition, digitization, and structural transformation requirements, financial fluidity becomes a strategic determinant.
An economy where invoices accumulate without financing is a slowed economy.
An economy where productive investment is delayed due to lack of appropriate mechanisms is an economy that loses competitiveness.
Countries where factoring represents more than 10% of GDP did not do so by chance. They understood that these instruments are invisible but structuring financial infrastructures.
The UEMOA must aim for this ambition.
A call for coordinated action
It is up to the BCEAO and community authorities to continue harmonization efforts and ensure consistency between prudential framework, taxation, and legal security. The objective must be clear: to create an environment where these instruments become natural, fluid, and attractive.
To national authorities, it is their responsibility to strengthen the efficiency of execution mechanisms and secure contractual rights.
To banks, we must take an additional step. Industrialize these products. Develop specialized skills. Invest in flow-oriented analysis systems. Establish partnerships with credit insurers and specialized actors. Make factoring and leasing strategic growth axes, not peripheral offers.
Finally, for SMEs, it is their responsibility to strengthen their formalization, the quality of their financial information, and the traceability of their transactions. Access to flow-based financing requires transparency and discipline.
From availability to ambition
The UEMOA has the texts.
It has strong institutions.
It has resilient banks.
It has a dynamic entrepreneurial fabric.
What we need now is to cross the systemic threshold.
To ensure that, in ten years, factoring and leasing represent a significant share of SME financing in the Union, contributing to reducing the financing gap estimated at several billion dollars.
The issue goes beyond bank balances.
It concerns the structural transformation of our economies.
And on this front, inaction would have a high cost.
It is time to act with ambition.
