The Nigerian Senate has progressed a bill that aims to establish a legal framework to ease transactions between large corporations and Small and Medium Enterprises (SMEs). The “Factoring Assignments and Receivables Financing Bill 2023,” sponsored by Senator Tokunbo Abiru (APC, Lagos East), passed its second reading on Thursday.
The bill seeks to improve transparency, legal certainty, and protection for creditors and debtors, ultimately enhancing access to capital and credit for SMEs. During his presentation, Senator Abiru explained that the legislation would enable SMEs to transfer their rights to payment from debtors to a third-party factor. This factor would manage the collection of receivables, providing immediate cash flow to the SMEs.
The bill is designed to help SMEs secure financing from banks and financial institutions based on supply orders from larger corporations, such as Nestle and Cadbury, which often operate on credit terms. This would give SMEs more access to working capital.
Senators unanimously supported the bill, acknowledging its potential to empower SMEs and promote business growth. Senator Abiru highlighted that debt factoring offers SMEs a structured way to convert receivables into cash, improving business transactions with large corporations.
