Evolution of Factoring in Egypt and Implications for Factoring Development in Africa

This paper examines the evolution of factoring in Egypt and attempts to draw implications for Africa. Egypt is one of the 5 African countries with thriving factoring business. Factoring volume in Egypt grew at an impressive pace in 2013 as economic activity began to show signs of recovery and the political environment stabilized. Total factoring volume rose by more than 100% from €220 million in 2012 to €450 million in 2013. This is a sharp contrast to developments in 2011, which saw a reversal of the 5 consecutive years of expansion of factoring business as a result of the Arab Spring Revolution that broke in Egypt in January 2011. Recovery of tourism and manufacturing industries aided domestic factoring in 2012 and 2013. Total domestic factoring volume surpassed the country’s international factoring volume in 2012, the first time since 2004. The strong growth of factoring business is a direct response to the steady recovery of economic activity, policy and legal reforms and introduction of business reforms to support the growth of Small and Medium Scale Enterprises (SME) sector in the country. Growth of factoring business is expected to accelerate in 2014 and 2015, supported by forecast strong growth of the Egyptian economy and the implementation of policy reforms. In what follows, we highlight the current state of factoring in Africa in Section 2, and, discuss the Egyptian macroeconomic environment in Section 3. The legal environment for factoring and the factoring market performance in Egypt are discussed in Sections 4 and 5 respectively. Section 6 identifies the challenges to factoring in Egypt and Section 7 attempts to project future developments in factoring market in Egypt. Section 8 concludes with implications for Africa. Journal of Contemporary Issues in African Trade and Trade Finance, 1(1), 17-25