Barriers to the Use of Factoring Accounts Receivables: The Ghanaian Contractor’s Perception
Factoring accounts receivable is widely accepted as an alternative financing source and utilized in almost every industry that sells business-to-business or business-to-government. However, its patronage in the construction industry is very limited as some barriers hinder its application in the construction industry. This study aims at assessing the barriers to the use of factoring accounts receivables in the Ghanaian construction industry. The study adopted the sequential exploratory research method where structured and unstructured questionnaires were conveniently distributed to D1K1 and D2K2 construction firms in Ghana. Using the one-sample t-test and Kendall’s Coefficient of concordance data were analyzed. The most severe challenge concluded is the high cost of factoring patronage. Other critical challenges identified were low knowledge on factoring processes, inadequate access to information on factoring, and high risks involved in factoring. Hence, it is recommended that contractors should be made aware of the prospects of factoring of accounts receivables in the construction industry. This study serves as basis for further rigorous research into factoring of accounts receivables in the industry.
[1] Ahadzie D. K., Proverbs D. G., Olomolaiye P. O., (2007). Critical success criteria for mass house building projects in developing countries, “International Journal of Project Management”, pp. 675-687.
[2] Banerjee, P. K. (2003). Global factoring business: trend and performance, Finance India, 17(4), pp. 1399–1414.
[3] Brinsley, P. (2013). Factoring legislation and regulation (PowerPoint slides). Retrieved from African Export-Import Bank and Point Forward Limited workshop in Douala, Cameroon: http://www.afreximbank.com.
[4] Chan, E. H., Qian, Q. K., and Lam, P. T. (2009). The market for green building in developed 924 Asian cities the perspectives of building designers. Energy Policy, 37(8), pp. 3061-3070.
[5] Chen J. and Chen W. (2012). Contractor costs of factoring account receivables for a construction project, “Journal of Civil Engineering and Management” Vol. 18, No.2, pp. 227-234.
[6] Chen, J.-H. (2005). Establishing the mechanism of corporate financing between financial institutions and engineering consulting firms. PCC Technical Report No. PG94050027. Taipei: Public Construction Commission., pp. 48.
[7] Factors Chain International (2006). Annual Review. Amsterdam: Factors Chain International, pp. 124.
[8] Field, A. (2005). Discovering Statistics using SPSS for Windows, London: Sage Publication.
[9] Fiordelisi, F.; Molyneux, P. (2004). Efficiency in the factoring industry, Applied Economics 36(9), pp. 947–959: http://dx.doi.org/10.1080/00036884042000233177.
[10] García-Santillán, A., Moreno-García, E., & Núñez, A. C. A. (2014). Factoring as a financial alternative to firms (Case of study of firms providing services to the Federal Electricity Commission). Journal of Applied Finance and Banking, 4, 193-207. Retrieved from http://www.scienpress.com/journal_focus.asp?Main_Id=56.
[11] Hoonakker, P. and Carayon, P., (2009). Questionnaire survey nonresponse: A comparison of postal mail and internet surveys. Intl. Journal of Human–Computer Interaction, 25(5), pp.348-373.
[12] International Factors Group (IFG). (2013). Global Industry Activity Report (GIAR) 2012. Brussels, Belgium: International Factors Group. Retrieved from http://www.ifgroup.com/wp-content/uploads/2013/07/GIAR-2012-Public-1.pdf.
[13] Kameni, E. (2014). Regulatory reforms in Africa. In M. Bickers (Ed.), World factoring yearbook 2014 (pp. 6-12). Kent, United Kingdom: BCR Publishing Ltd.
[14] Kissi, E., (2013). Empirical understanding of the status of professional project management practices in the Ghanaian building industry (Doctoral dissertation).
[15] Klapper, L. (2006). The role of factoring for financing small and medium enterprises. Journal of Banking & Finance, 30, 3111-3130.doi:10.1016/j.jbankfin.2006.05.001.
[16] Ling Y. Y. (2002). A conceptual model for the selection of architects by project managers in Singapore. “International Journal of Project Management”; Vol. 21: pp. 135–44.
[17] Milenkovic-Kerkovic T. and Dencic-Mihajlov K. (2012). Factoring in the changing environment: Legal and Financial Aspects, “International Conference: Service Sector in Terms of Changing Environrment”, Vol. 44, pp. 428-435.
[18] Ofori, P. A., Twumasi-Ampofo, K., Danquah, J. A., Osei-Tutu, E., & Osei-Tutu, S. (2017). Investigating challenges in financing contractors for public sector projects in Ghana.
[19] Oramah, B. O. (2013). From the periphery to the centre - Africa as the growth market for factoring. In M. Bickers (Ed.), World factoring yearbook 2013 (pp. 6-9). Kent, United Kingdom: BCR Publishing Ltd.
[20] Ott, R.L. and Longnecker, M., (2001). Statistical methods and data analysis. Thomson Learning.
[21] Price, A. D. F.and Shawa, H. 1997. Survey of project related finance in United Arab Emirates, “Journal of Construction Engineering and Management”, Vol. 123, No.3, pp. 223–232. http://dx.doi.org/10.1061/(ASCE)0733-9364(1997)123:3.
[22] Ruozi, R. and Rossignoli, B. (1985). Manuale del Factoring (Handbook of Factoring). Milan: Giuffr., pp. 149.
[23] Rutberg, S., (1994), The History of Asset Based Lending, New York: Commercial Finance Association., 1994.
[24] Sopranzetti, B. (1999). Selling accounts receivable and the underinvestment problem. The Quarterly Review of Economics and Finance, 39, 291–301.
[25] Soufani, K. (2002). The Decision to Finance Accounts Receivable: The Factoring Option. Managerial & Decision Economics, 23(1), 21-32.
[26] Vasilescu, L. G. (2010). Factoring – Financing alternative for SMEs. Proceedings of the Management of International Business and Economics Systems, Greece, 13-23. Retrieved from http://mibes.teilar.gr/,
[1] Ahadzie D. K., Proverbs D. G., Olomolaiye P. O., (2007). Critical success criteria for mass house building projects in developing countries, “International Journal of Project Management”, pp. 675-687.
[2] Banerjee, P. K. (2003). Global factoring business: trend and performance, Finance India, 17(4), pp. 1399–1414.
[3] Brinsley, P. (2013). Factoring legislation and regulation (PowerPoint slides). Retrieved from African Export-Import Bank and Point Forward Limited workshop in Douala, Cameroon: http://www.afreximbank.com.
[4] Chan, E. H., Qian, Q. K., and Lam, P. T. (2009). The market for green building in developed 924 Asian cities the perspectives of building designers. Energy Policy, 37(8), pp. 3061-3070.
[5] Chen J. and Chen W. (2012). Contractor costs of factoring account receivables for a construction project, “Journal of Civil Engineering and Management” Vol. 18, No.2, pp. 227-234.
[6] Chen, J.-H. (2005). Establishing the mechanism of corporate financing between financial institutions and engineering consulting firms. PCC Technical Report No. PG94050027. Taipei: Public Construction Commission., pp. 48.
[7] Factors Chain International (2006). Annual Review. Amsterdam: Factors Chain International, pp. 124.
[8] Field, A. (2005). Discovering Statistics using SPSS for Windows, London: Sage Publication.
[9] Fiordelisi, F.; Molyneux, P. (2004). Efficiency in the factoring industry, Applied Economics 36(9), pp. 947–959: http://dx.doi.org/10.1080/00036884042000233177.
[10] García-Santillán, A., Moreno-García, E., & Núñez, A. C. A. (2014). Factoring as a financial alternative to firms (Case of study of firms providing services to the Federal Electricity Commission). Journal of Applied Finance and Banking, 4, 193-207. Retrieved from http://www.scienpress.com/journal_focus.asp?Main_Id=56.
[11] Hoonakker, P. and Carayon, P., (2009). Questionnaire survey nonresponse: A comparison of postal mail and internet surveys. Intl. Journal of Human–Computer Interaction, 25(5), pp.348-373.
[12] International Factors Group (IFG). (2013). Global Industry Activity Report (GIAR) 2012. Brussels, Belgium: International Factors Group. Retrieved from http://www.ifgroup.com/wp-content/uploads/2013/07/GIAR-2012-Public-1.pdf.
[13] Kameni, E. (2014). Regulatory reforms in Africa. In M. Bickers (Ed.), World factoring yearbook 2014 (pp. 6-12). Kent, United Kingdom: BCR Publishing Ltd.
[14] Kissi, E., (2013). Empirical understanding of the status of professional project management practices in the Ghanaian building industry (Doctoral dissertation).
[15] Klapper, L. (2006). The role of factoring for financing small and medium enterprises. Journal of Banking & Finance, 30, 3111-3130.doi:10.1016/j.jbankfin.2006.05.001.
[16] Ling Y. Y. (2002). A conceptual model for the selection of architects by project managers in Singapore. “International Journal of Project Management”; Vol. 21: pp. 135–44.
[17] Milenkovic-Kerkovic T. and Dencic-Mihajlov K. (2012). Factoring in the changing environment: Legal and Financial Aspects, “International Conference: Service Sector in Terms of Changing Environrment”, Vol. 44, pp. 428-435.
[18] Ofori, P. A., Twumasi-Ampofo, K., Danquah, J. A., Osei-Tutu, E., & Osei-Tutu, S. (2017). Investigating challenges in financing contractors for public sector projects in Ghana.
[19] Oramah, B. O. (2013). From the periphery to the centre - Africa as the growth market for factoring. In M. Bickers (Ed.), World factoring yearbook 2013 (pp. 6-9). Kent, United Kingdom: BCR Publishing Ltd.
[20] Ott, R.L. and Longnecker, M., (2001). Statistical methods and data analysis. Thomson Learning.
[21] Price, A. D. F.and Shawa, H. 1997. Survey of project related finance in United Arab Emirates, “Journal of Construction Engineering and Management”, Vol. 123, No.3, pp. 223–232. http://dx.doi.org/10.1061/(ASCE)0733-9364(1997)123:3.
[22] Ruozi, R. and Rossignoli, B. (1985). Manuale del Factoring (Handbook of Factoring). Milan: Giuffr., pp. 149.
[23] Rutberg, S., (1994), The History of Asset Based Lending, New York: Commercial Finance Association., 1994.
[24] Sopranzetti, B. (1999). Selling accounts receivable and the underinvestment problem. The Quarterly Review of Economics and Finance, 39, 291–301.
[25] Soufani, K. (2002). The Decision to Finance Accounts Receivable: The Factoring Option. Managerial & Decision Economics, 23(1), 21-32.
[26] Vasilescu, L. G. (2010). Factoring – Financing alternative for SMEs. Proceedings of the Management of International Business and Economics Systems, Greece, 13-23. Retrieved from http://mibes.teilar.gr/,
@article{"International Journal of Business, Human and Social Sciences:80699", author = "E. Kissi and V. K. Acheamfour and J. J. Gyimah and T. Adjei-Kumi", title = "Barriers to the Use of Factoring Accounts Receivables: The Ghanaian Contractor’s Perception", abstract = "Factoring accounts receivable is widely accepted as an alternative financing source and utilized in almost every industry that sells business-to-business or business-to-government. However, its patronage in the construction industry is very limited as some barriers hinder its application in the construction industry. This study aims at assessing the barriers to the use of factoring accounts receivables in the Ghanaian construction industry. The study adopted the sequential exploratory research method where structured and unstructured questionnaires were conveniently distributed to D1K1 and D2K2 construction firms in Ghana. Using the one-sample t-test and Kendall’s Coefficient of concordance data were analyzed. The most severe challenge concluded is the high cost of factoring patronage. Other critical challenges identified were low knowledge on factoring processes, inadequate access to information on factoring, and high risks involved in factoring. Hence, it is recommended that contractors should be made aware of the prospects of factoring of accounts receivables in the construction industry. This study serves as basis for further rigorous research into factoring of accounts receivables in the industry.", keywords = "Barriers, contractors, factoring accounts receivables, Ghanaian, perception.", volume = "16", number = "3", pages = "73-4", }
