Cross-border factors

Demystifying the chimera of free movement of capital within the East African Community Common Market

Abstract

In most of the East African Community (EAC) countries factoring has been subjected to, inter alia, highly restrictive and unclear regulatory infrastructure with inaccurate terminology, capital adequacy, licence and partly-local ownership requirements, making it difficult for factors to offer their services in the other Partner States. This, therefore, impedes the freedom of movement of capital within the Community, rendering Article 76 of the Treaty for the Establishment of the East African Community (hereinafter referred to as the EAC Treaty) and Article 24 of the Protocol on the Establishment of the East African Community Common Market nugatory. Despite the EAC Treaty prohibiting unnecessary restrictions, the Partner States have exuded some exasperating nonchalance towards liberalizing their internal financial markets to allow free movement of capital. Cross-bordering factoring has been regarded as a significant vehicle that can drive the global economy to development. Despite its impressive prospects for future growth, cross-border factoring regulations within EAC Partner States domestic markets remain largely restrictive, hence impeding free movement of capital within the EAC common market. This paper, therefore, sets out to suggest reforms in the Partner States domestic markets and the Common Market that if implemented, will ensure the EAC objective of enhancing free movement of capital within the Common Market is achieved.