Technology to unlock SME Working Capital Financing

At Benefactors, we provide factoring services that consist of advancing funds to businesses (mostly SMEs) based on their Accounts Receivables. In non-technical terms, we give money to SMEs that need immediate cash, against invoices that they issued to their clients who generally apply 45 to 90 days payment terms.

Factoring products have proven to be great contributors to improving access to finance for SMEs in general and particularly in Africa as expanded on by our CEO on this Video. However, factoring services have only seen limited adoption in Africa at only around a volume of $30 Billion / Year (90% of it in South Africa alone) when it could be as high as ten times! We have already been working on mitigating that gap in Rwanda with more than 2000 Invoices financed over the past 2 Years.

We believe that building Internet Era technologies to power SME financing through alternatives such as factoring will even further broaden their reach. Here is how:

• First, the factors’ most crucial work is to build long-lasting relationships with SMEs. Therefore, the technology to capture different exchanges with clients from Application to receiving the funds shouldn’t add a layer that complicates and slows this relationship. Did they receive a document from their client over WhatsApp? The UI/UX needs to allow them to seamlessly capture the information into the back-office regardless of what digital channel it was sent through.
• Second, a critical stage in the process of factoring is decision making using both internal data and external factors. To be able to scale this stage, the technology shall be open enough to connect to different sources of data. It will leverage Data Science and Machine Learning not only to reduce the effort spent on making decisions but also to improve their quality.
• Third, like for any other financial service, several transactions, settlements, and reconciliations are orchestrated to close the loop. Through integrations with different financial institutions, factoring technology needs to coordinate these transactions flawlessly and fast. In the future, we envision that Blockchain technologies have the potential to take Invoice financing to another stage by turning trade documents such as invoices into easily tradable digital assets.

We have confidence that by doing the above right, we will prove that technology can make factoring business scalable. As a result, it will convince many other financial institutions to consider factoring as part of their product portfolio. We hope that we will have built a platform that will allow them to do so, quickly!