Addressing the MSME Working-Capital Gap in East and Southern Africa through Receivables-Backed Supply Chain Finance

Addressing the MSME Working-Capital Gap in East and Southern Africa through Receivables-Backed Supply Chain Finance.

By Peter Jarvis, Chief Investment Officer at African Alliance Asset Management.

1. Addressing the MSME Working-Capital Gap in East and Southern Africa through Receivables-Backed Supply Chain Finance

   Current Challenges

   African MSMEs face a chronic shortage of working capital. The continent-wide financing gap exceeds hundreds of billions of dollars, with the overwhelming majority tied to short-term liquidity rather than long-term investment. In East and Southern Africa, suppliers routinely wait 60–90 days or more for payment while facing borrowing costs of 20–30 % per annum or higher. The consequences are severe: restricted growth, low inventory turnover, missed opportunities, and supply chains that remain fragile in the face of routine economic or external shocks.

   Solution Overview

   A new, fully digital receivables-backed supply chain finance programme launched in Eswatini in December 2025 and expands to Kenya in February 2026. Delivered through a partnership between regional investment bank African Alliance and Mauritius-regulated specialist Ziada Credit Solutions, the platform is deliberately designed to be funder- and technology-agnostic, enabling swift replication across additional markets in the region.

   The mechanics are straightforward and powerful:

   • Suppliers receive payment within 2–5 days of invoice approval on a non-recourse basis.
   • Large buyers gain up to 120-day payment terms with no balance-sheet impact (classified as trade payables under IFRS and local standards).
   • Funding cost is tied solely to the buyer’s credit rating, delivering hard-currency finance at single-digit effective rates—typically 50–70 % below prevailing SME borrowing costs.
   • Risk is eliminated via Irrevocable Payment Undertakings issued by the buyer or its bank; no supplier collateral is required.
   • End-to-end digital workflow integrates directly with major ERP systems and local payment rails.

   Early Progress

   Live pilot transactions are already running in Eswatini’s sugar and retail sectors with investment-grade anchor buyers. Onboarding momentum and invoice volumes have surpassed initial targets, creating clear visibility toward rapid portfolio growth across the initial markets and beyond.

    

   Track Record

   Similar non-recourse programmes elsewhere in Africa have consistently achieved:

   • Sharp reductions in supplier payment delays
   • Near-zero default rates when underpinned by proper payment undertakings
   • Dramatically lower funding costs for suppliers
   • Zero impact on buyer debt ratios or banking covenants

   Key Takeaways

   Receivables-backed supply chain finance represents the most efficient and scalable way to close the working-capital gap because it shifts the burden of finance from the weakest to the strongest credit in the chain—without requiring ongoing public subsidy.

   Digital delivery, irrevocable undertakings, and local currency pricing remove the historical obstacles that previously blocked widespread adoption across the continent.

   For large buyers, early payment programmes are rapidly becoming a strategic imperative rather than a CSR initiative: reliable payers secure the best suppliers, negotiate better terms, and build supply chains that are materially harder to disrupt.

   Next Steps

   • Anchor buyers should immediately identify strategic suppliers and begin issuing payment undertakings.
   • Commercial banks and international funders should provide confirmation lines—the risk-return profile is exceptionally strong.
   • Development partners can accelerate early adoption with targeted guarantees, then step aside as commercial capital takes over.
   • Regulators should clarify the legal standing of digital invoices and payment undertakings; minor policy adjustments can unlock major private-sector flows.
   • Technology partners should prioritise seamless ERP and payment-rail connectivity.

   Outlook

   A proven, commercial, and replicable model now exists to release billions in trapped working-capital liquidity across East and Southern Africa. The platform is live, the economics work, and the momentum is building.

   The only open question is which organisations—corporates, banks, and policymakers—will move fastest to capture the strategic and commercial advantages on offer.