The Zimbabwe Stock announced the official launch of the Zimbabwe Receivables Market which had been on the cards for some time now. While talk of the Victoria Falls Stock Exchange currently hogs the limelight the Zimbabwe receivables exchange is something that means a lot more particularly in the small business landscape. The receivables market will firstly provide a place where invoices can be factored, helping businesses access liquidity. Secondly, these receivables will be traded on a market basis which should mean cheaper discounting for invoice sellers. The ZRM is the result of a joint venture between the ZSE and the Harare receivables exchange.
Receivables discounting is the process through which financiers, known as factors, will purchase invoices from business and provide them with cash on the spot. The invoices are discounted or factored and the invoice owner receives less than the face value of the invoice. The factor then collects the invoice when it is due and derives profit. You can read more about invoice discounting and how it helps businesses.
The receivables exchange goes a step further to provide a market for these receivables. The advantages that come with this are many. For one, the market nature allows for greater liquidity. Instead of the traditional factor setup more players on the buying end means better liquidity and at more competitive rates. Secondly, the discount factor will depend more on market resources about the debtor than the business seeking factoring. Invoices will be priced based on the debtor rather than the holder. The receivables market also introduces a short time investment option for Entities with excess cash who wish to invest in the short term. All these factors put together to provide cheaper finance for businesses.
The ZRM will facilitate both Zimbabwean dollar and US dollar business making it a multi-currency platform. This should mean they will accommodate invoices in both or more where convertible currencies.
The ZSE has been on a quest to improve financial systems in the country ever since it woke from its slumber. The Zimbabwe Receivables Market, Options & other derivatives, Exchange Traded Funds and Real Estate Investment Trusts were all announced to come in 2020. The emergence and subsequent worldwide spread of COVID 19 have drastically slowed down progress but it is pleasing to see progress being made still.