Factoring: a new tool for improving business cash flow
On Thursday 20 May 2026, the National Assembly passed the bill on factoring.
What is factoring?
Factoring is a mechanism whereby a company assigns its trade receivables to a specialist firm (the factor) in order to receive payment in advance. The factor then takes charge of collecting the amounts owed from the customers.
In practical terms, a company no longer has to wait 60 or 90 days to collect its invoices: it assigns them and receives the funds immediately. Factoring thus finances the operating cycle, secures the collection of receivables and covers the risk of non-payment.
Why a new provision?
SMEs account for 99.8% of Senegal’s economic fabric and generate 80% of jobs, yet they have access to less than 10% of the banking portfolio. Factoring is designed precisely to circumvent this barrier, without requiring collateral. Yet its share of bank lending remained negligible: 0.05% in 2022, 0.13% in 2023, 0.18% in 2024.
This underdevelopment is due to the absence of a dedicated legal framework. Only a general directive from the BCEAO provided a framework for the sector, without defining the contractual rules or the rights of the parties. Decision No. 23/CM/UMOA of 10 December 2020 established a uniform law for all member states. This Act transposes that law into Senegalese law.
Four major innovations
Opening up to microfinance institutions: the activity is no longer restricted to banks alone. MFIs, supervised by the BCEAO, can now offer factoring, thereby significantly broadening small businesses’ access to this instrument.
Precise financial and accounting rules: the factor’s remuneration, applicable taxation, and the establishment of the guarantee fund: everything is now regulated, removing the uncertainty that was holding operators back.
Clearly defined rights and obligations: the text specifies the responsibilities of each party (member, factor and assigned debtor) in all contractual scenarios.
Effective penalty regime: the law is accompanied by penalties applicable in the event of non-compliance, providing fair protection for all parties.
What this means for businesses
Any SME that supplies goods or services on credit can now access rapid working capital financing without having to wait for its invoices to fall due. It outsources debt collection, reduces the risk of non-payment and can immediately reinvest in its business.
Complementing leasing, which finances long-term investment, factoring covers day-to-day working capital requirements. Together, these two laws provide Senegal with a range of modern financial instruments, supporting the competitiveness of its businesses and the ambitions of the SND 2025-2029.