BUSINESS

Why Escrow is the Safer Option for Small and Medium Scale Businesses

Published

1 year ago

Why Escrow is the Safer Option for Small and Medium-Scale Businesses

In the business sector, regardless of the size of business or the volume of transaction, ensuring a secure and reliable transactions is paramount. Small and medium-sized businesses (SMEs) often encounter certain difficulties when it comes to carrying out online transactions. This is because they may not have the same amount of resources and infrastructure as larger companies. This is where the role of escrow services becomes increasingly important.

Small and medium-sized businesses face a significant risk of fraudulent transactions, payment disputes, and other financial challenges that can seriously harm their growth and stability. This is mainly due to their limited resources and tight budgets. Fortunately, there is a time-tested solution that offers a protective shield for SMEs known as escrow. In this article, we’ll look into why using escrow is a safer choice for small and medium-sized businesses.

What is Escrow?

An escrow is a convenient arrangement used by many businesses, in which a trusted third party temporarily holds the assets involved in a transaction. The assets are kept safe in a separate account until both sides fulfill the terms and conditions of the agreement. This setup adds extra protection and security for everyone involved. The main goal of an escrow is to make sure that all parties meet their obligations. It acts as a fair mediator, making sure that the assets are only transferred when all the agreed-upon terms are met.

When it comes to online transactions, it can be challenging to know if you can trust the other person involved. To address this concern, licensed online third-party services offer escrow services to safeguard both buyers and sellers. These services act as intermediaries, ensuring that the transaction proceeds safely without any complications or fraud. Once both parties have fulfilled their obligations as stated in their agreed terms, the online escrow provider completes the transaction by transferring the funds to the seller.

Benefits of Escrow for Small & Medium Scale Businesses

Escrow services can provide several benefits for small and medium-scale businesses. Here are some of the key advantages:

1. Mitigating Financial Risks

For SMEs, every transaction carries a certain level of financial risk. This can be particularly challenging when dealing with new customers or unknown vendors. Escrow services act as a neutral third party, holding funds until both parties fulfill their obligations. By using escrow, SMEs can significantly mitigate the risk of non-payment or non-delivery, ensuring that they receive the agreed-upon payment or goods before releasing the funds. This helps safeguard the financial interests of SMEs and minimizes potential losses.

2. Protecting Against Online Fraud and Scams

The online marketplace can be a breeding ground for fraud and scams, and this can cause serious damage to small and medium-sized businesses. Fake listings, non-delivery of goods, and unauthorized chargebacks are just a few examples of fraudulent activities that SMBs may encounter. Escrow services provide a crucial layer of protection by verifying transactions and ensuring that funds are securely held until the buyer receives and approves the merchandise. This significantly reduces the risk of falling victim to fraudulent schemes and helps SMEs maintain their financial stability.

Establishing Trust with Customers

Building trust is paramount for SMEs seeking to establish a solid reputation in the market. When customers perceive a business as trustworthy, they are more likely to do business with them again and again. By utilizing escrow services, SMEs demonstrate their commitment to secure transactions and customer satisfaction. Customers feel reassured knowing that their payments are held in escrow until they receive the products or services as promised. This trust-building aspect of escrow services can significantly benefit small and medium-scale businesses.

4. Streamlining Transactions and Reducing Administrative Burden

Running an SME often means wearing multiple hats and managing various aspects of the business simultaneously. Escrow services can help alleviate some of the administrative burden associated with financial transactions. By providing a structured and standardized process, escrow services simplify the transaction workflow. SMEs can focus on their core operations while relying on the escrow service to handle the intricacies of payment verification, dispute resolution, and fund release. This streamlining of transactions frees up valuable time and resources for SMEs to focus on growth and innovation.

5. Dispute Resolution

Disputes can arise in any business transaction, and SMEs are not immune to such challenges. Escrow services offer a structured mechanism for resolving disputes, providing a fair and impartial platform for both parties to present their cases. Small and medium-sized enterprises (SMEs) can benefit from using an escrow service to handle disputes more efficiently and affordably. This approach reduces disruptions to business operations and maintains positive relationships with customers and suppliers.

6. Facilitating Business Expansion

Escrow services play a crucial role in facilitating the growth and expansion of SMEs. As businesses expand their customer base and engage in larger transactions, the potential risks also increase. Escrow acts as a safeguard, allowing SMEs to enter into bigger deals with confidence. This financial security encourages SMEs to take calculated risks, explore new opportunities, and expand their operations.

7. International Trade Facilitation

For businesses engaged in international trade, escrow services can be particularly advantageous. They can assist in reducing risks that come with international transactions, like dealing with different currencies, following regulations, and managing shipping processes. Escrow services can provide a secure and efficient mechanism for conducting international business, fostering confidence and reducing uncertainties.

8. Financing Assistance

Escrow services can also support businesses in securing financing or loans. By holding assets or collateral in escrow, businesses can demonstrate their commitment to fulfilling financial obligations, increasing their credibility and improving their chances of obtaining favorable financing terms.

How to Select the Best Escrow Service for your Business

Choosing the right escrow service for your business is crucial to ensure your financial transactions are secure and go smoothly. With numerous options available, it’s important to consider several factors before making your decision. Here are some key factors to consider when selecting an escrow service for your business:

1. Accreditation, Reliability, and Insurance

First and foremost, make sure that the escrow service you choose is properly licensed and accredited. Take some time to carefully look into the information provided and confirm the legitimacy of the company you’ll be dealing with. Additionally, consider the location and licensing of the company. Some countries have stringent standards for granting business licenses, which adds credibility to the service.

2. User-Friendliness

The usability of the escrow service is crucial. If the web interface is confusing and you find yourself unsure of which stage you are at, it becomes difficult to utilize the service effectively. It is essential to understand how the system operates. Opting for a digital escrow service offers the added advantage of conducting all transactions online, eliminating the need to physically submit documents to a bank. This convenience is particularly valuable during the ongoing Covid-19 pandemic, where movement restrictions are prevalent in many regions.

3. Flexibility

Flexibility plays a vital role, especially when engaging in international transactions. Quick and flexible payment options are key to expediting deals. The ability to make payments in your local currency and and foreign currencies will offer significant advantages to your business and broaden your customer base.

4. Niche Expertise

Different industries require specialized escrow services tailored to their unique needs. Whether it’s real estate, website transactions, cross-border import/export, or general purposes, it’s important to select an escrow service aligned with your industry. Niche expertise is valuable because it indicates that the escrow provider understands the specific challenges of your industry and can address them effectively. For example, if you operate in e-commerce trade, Kusnap or Peppa should be your preferred escrow service. Dealing with generalists may prove more challenging as they might not have a comprehensive understanding of your business requirements.

5. Communication

Effective communication is vital when choosing any business partner or service, and escrow is no exception. Before encountering a crisis situation, test the responsiveness and relevance of the service’s customer support. Prompt and competent communication from the escrow service representative enhances the overall value of the service.

6. Reviews and Reputation

Choosing the right escrow service for your business is really important, and their reputation matters a lot. It’s crucial to ensure that the escrow service you choose operates with integrity and has a solid reputation. Take the time to research and read customer reviews about the company to gauge the satisfaction levels of previous clients. Opt for an escrow service that is known for its professionalism, attention to detail, ethical practices, and strong reputation. This way, you can be confident that you’ll get the high-quality service you deserve.

Conclusion

Escrow services are a great choice for small and medium-scale businesses as they provide a safer and more reliable way to handle transactions. By mitigating financial risks, protecting against fraud and scams, building trust with customers and suppliers, streamlining transactions, and facilitating dispute resolution, escrow services empower SMEs to navigate the complexities of the business world with confidence. Embracing escrow as a preferred method for financial transactions can help SMEs safeguard their interests, foster growth, and establish a reputation for trustworthiness in the marketplace.

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BUSINESS

Adamawa Mortgage Bank Faces ₦10 Billion Lawsuit for Alleged Contract Breach with Wisdom Kwati Smart City

Published

2 weeks ago

Christopher

Wisdom Kwati Smart City Ltd, a prominent property development firm based in Abuja, has launched a lawsuit against Adamawa Mortgage Bank Ltd, seeking ₦10 billion in damages. The legal action follows a breach in a joint venture agreement between the two parties for a 20.5-hectare property development in Sangere Village, Yola South, Adamawa State.

Adamawa Mortgage Bank Faces ₦10 Billion Lawsuit for Alleged Contract Breach with Wisdom Kwati Smart City

The joint venture was established to transform the Sangere property into a large-scale residential development, with work already underway and over 3.5 billion invested in the construction of over 200 housing units and on the estate’s infrastructures. However, tensions arose when Adamawa Mortgage Bank publicly withdrew from the agreement, and without appropriate notice or engagement with the firm, released a statement on The Cable newspaper on November 9, 2024. In its announcement, the bank warned prospective buyers, stating:

“This is to inform the general public that Adamawa Mortgage Bank Ltd is not selling its land at Sangere-Wisdom Kwati Smart City. Anyone buying land at the property does so at his own risk. Take further notice that the bank has withdrawn from the joint venture agreement with Wisdom Kwati Smart City. Thank you. Signed Management.”

Following this statement, Wisdom Kwati Smart City Ltd, led by Chairman Mr. Wisdom Kwati, filed for both an interlocutory and interim injunction. The lawsuit names both Adamawa Mortgage Bank Ltd and its Managing Director, Dr. Noris Giscard Stanley, as defendants, alleging breach of contract and reputational harm caused by the bank’s public renouncement.

On November 14, 2024, the High Court of Justice of Adamawa State issued an interim injunction, temporarily restraining the mortgage bank from further actions related to the property until a resolution is reached. The court has ordered the defendants to respond to the claims and appear before the court within 30 days of receiving the summons.

The implications of the contract dispute are significant, given the current stage of the project. According to representatives of Wisdom Kwati Smart City Ltd, the company has invested over ₦3.5 billion in construction and developmental costs on over 200 buildings currently under construction at the site, of which over 50 units are at the finishing level of construction, and infrastructural development that are well into the third phase of the company’s five-phase development plan.

Industry observers suggest that a swift resolution of the dispute would be in the best interests of both parties and their investors, who rely on the stability of the joint venture to secure their investments. The project, originally designed to develop 317 mixed housing units, is already well past its midpoint, making it highly unreasonable for a partner to withdraw at this stage.

Wisdom Kwati Smart City Ltd has expressed a commitment to seeing the project through to completion and ensuring that stakeholders are kept informed of any significant developments in the case. Despite the legal steps taken, the real estate company has reportedly made several attempts to resolve the matter through dialogue, but the bank has reportedly not been forthcoming.

BANKING

Afreximbank Acts as Joint Lead Manager on Ecobank Transnational Incorporated’s USD 400mn Senior Unsecured Note Issuance

Published

1 month ago

Christopher

The proceeds of the note will fund general corporate purposes of the issuer, including refinancing of a USD350 million senior bridge-to-bond loan facility that was jointly coordinated by Afreximbank in March 2024.

African Export-Import Bank (“Afreximbank”) (www.Afreximbank.com) is pleased to announce that it has successfully acted as Joint Lead Manager and Bookrunner on a USD 400 million 10.125% Rule 144a/RegS senior unsecured note issuance by Ecobank Transnational Incorporated (“ETI”) due in October 2029.

The note issuance achieved peak orderbook oversubscription of 2.1x, backed by more than 70 high-quality and diverse investors comprising development finance institutions, asset managers, commercial banks and insurance companies from Africa, the UK, USA, Europe and the Middle East.

Professor Benedict Oramah, President and Chairman of the Board of Directors of Afreximbank, commenting on the transaction, said: “We are pleased to have supported Ecobank Transnational Incorporated (“ETI”) in placing the first public Eurobond issuance by any Sub-Saharan African financial institution since 2021, following our bridge financing support earlier in the year. This transaction underscores Afreximbank’s capacity and readiness to structure innovative market access solutions for our pan-African banking partners.”

Afreximbank’s Advisory and Capital Markets (ACMA) department acted as Joint Lead Manager and Bookrunner on the issuance, working alongside international and African partners.

Distributed by APO Group on behalf of Afreximbank.

BUSINESS

Japan: African Development Bank Celebrates Three Decades of Japan-Backed Trust Fund

Published

1 month ago

Christopher

Japan: African Development Bank Celebrates Three Decades of Japan-Backed Trust Fund

Over the past three decades, Japan has contributed JPY 5.3 billion ($ 37.4 million) to the PHRDG, supporting 107 projects, with 96 completed and 11 ongoing as of September 2024

The African Development Bank Group (www.AfDB.org) has celebrated the 30th anniversary of the Policy and Human Resource Development Grant (PHRDG), a bilateral trust fund created by Japan in 1994.The initiative has contributed significantly to the development of Africa’s human capital, supporting over 100 transformational projects across various sectors.

PRST at Keizai group

Presenting a commemorative publication on the trust fund at the Ministry of Finance in Tokyo on Wednesday, 16 October, Dr Akinwumi Adesina Adesina, African Development Bank Group President said the publication highlights three decades of successful collaboration and the impactful projects funded by the Policy and Human Resource Development Grant, as well as the critical role the grant has played in Africa’s socioeconomic development.

Over the past three decades, Japan has contributed JPY 5.3 billion ($ 37.4 million) to the PHRDG, supporting 107 projects, with 96 completed and 11 ongoing as of September 2024. In recent years, the trust fund has seen a notable increase in contributions, underscoring Japan’s renewed commitment to fostering a climate-smart, resilient, inclusive, and integrated Africa.

Japan’s Vice Minister of Finance for International Affairs, Atsushi Mimura, said he was pleased the country’s partnership with the African Development Bank Group was going well. He pledged continued support, particularly for the African Development Fund, the private sector, and Japanese and African start-ups

“We look forward to deepening Japan’s relationship with the African Development Bank,” he said.

Mimura described the African Development Bank Group’s partnership with the World Bank’s plan to bring electricity to 300 million Africans (Mission 300) as a powerful narrative that draws attention to the continent’s energy needs.

Adesina commended Japan for its strong support of the African Dev?

elopment Fund, noting that the Fund has delivered impressive results. He sought the country’s support on a wide range of issues, including the 17th general replenishment of the African Development Fund, Mission 300 (http://apo-opa.co/3YcTfy2), Special Drawing Rights, the private sector, and start-ups, among others.

“We thank the people of Japan for standing in solidarity with the people of Africa,” Adesina said.

Since its establishment, the PHRDG has been a vehicle for Japan to share its expertise and experience in human resource development, empowering Africans to lead the transformation of their societies and economies. The grant has supported a wide range of projects aligned with Japan and the African Development Bank Group’s shared objective of human capital development. Officials said the projects have laid the groundwork for accelerated economic growth in Africa.

In a foreword to the Policy and Human Resource Development Grant at 30 publication, Deputy Vice Minister of Finance for International Affairs Daiho Fujii, expressed Japan’s pride in celebrating the 30th anniversary of the PHRDG.

“Japan is leading the international community’s efforts to overcome global challenges, particularly those affecting vulnerable populations. Through the PHRDG, we provide technical cooperation to develop the human resources that will drive Africa’s socioeconomic transformation. Our partnership with the African Development Bank Group is key to realizing a more resilient and prosperous Africa.”

As the Policy and Human Resource Development Grant enters its fourth decade, the African Development Bank Group and Japan have expressed eagerness to expand their partnership. With six new projects in the 2024–2025 pipeline, including initiatives in higher education, debt management, and climate-smart agriculture, the trust fund remains a critical tool for delivering impact across Africa, officials said.

Both parties pledged to continue to work hand in hand to unlock the potential of Africa’s human capital, fostering innovation and economic development for generations to come.

Japan–Africa Dream Scholarship Program: Investing in the Future

Among the most impactful PHRDG-funded initiatives is the Japan-Africa Dream Scholarship Program (JADS), launched in 2017. This program aims to develop Africa’s human capital by offering scholarships to high-achieving African students for master’s studies in fields such as agriculture, development economics, energy, and public health. To date, the program has awarded scholarships to 23 students from 10 African countries, two-thirds of whom are women.

Graduates of the JADS program have gone on to make significant contributions to their home countries. Alumni include Mary Yeboah Asantewaa from Ghana, who now works at SORA Technology in Accra, leveraging drone technology to control infectious diseases, and Glory Sibale from Malawi, who joined Tokyo’s Taiyo-Yuka recycling company, focusing on sustainable agricultural project management.

As part of his mission to Japan, Adesina also met with Nobumitsu Hayashi, the Governor of the Japan Bank for International Cooperation, to expand collaboration in key areas, including agriculture, healthcare, energy access, support for youth entrepreneurs, critical minerals, and regional corridors.

Later Wednesday, Adesina met with the leadership of the Association of African Economic and Development Japan, where both parties discussed potential collaborations for impactful projects. He continued with meetings with Kanetsugu Mike, Chairman of Mitsubishi UFJ Financial Group, and Ken Shibuya, Co-Chairman of the Global South Africa Committee of Keizai Doyukai (Japan Association of Corporate Executives).

The African Development Bank president invited business leaders to the 2024 Africa Investment Forum to be held in Rabat in December. Adesina also hosted representatives of the African diplomatic corps, development partners, and the private and public sectors, where they discussed leveraging co-creative relationships with Japanese companies and institutions.

Distributed by APO Group on behalf of African Development Bank Group (AfDB).