How To Get Financing For Your African Business

How To Get Financing For Your African Business

If you are in need of financing for your African business you may be frustrated by the lack of both information and access in this regard. Hey, this is where I come in handy.

First up some truth: I think that too many start up entrepreneurs are letting the ‘need for finance’ dominate their ambition. Part of the problem is that many can’t wait to ask for a loan, funding, or investment. They are in a hurry to get things going and spend a lot of time trying to identify the source of funding – and less is spent on working on a strong convincing concept and how you will be serving the needs of your market!

Secondly, you will be amazed how many of the really successful African entrepreneurs who started their business in the last 7-10 years have started with literally no capital in hand. Yep, they are millionaires now. Let’s look at a couple of those I have featured before, just to show you what I mean.

Take Grace Ameh-Obeng: She built her skin care brand Forever Clair’ and beauty salon chain not by focusing on where she could get the money for cream production, treatment chairs, and rental costs, but by providing excellent service and solutions for women who were in urgent need to recover their skin that had been damaged by the effect of skin bleaching products. You know what, she started by going from house to house advising women and selling her skin care to reach where she is today.

Or take Patrick Ngblack-man-with-piggy-bank-pfowi from Tanzania. He started his solar business ‘Helvetic Solar’ a few years ago with a loan from his mother, a couple of thousand Dollars, and brought first small solar equipment from China to Tanzania as he had no money for bigger installations – he had to start very small, one house at a time, as he describes it. Now he makes millions and met Al Gore during climate change discussions.

There are so many ways to start small and grow big and it is important that you explore those avenues and widen your horizon allowing to let in options that you may not have previously considered.

Now, having said that – access to financial capital is overall very important, especially once you have started and want to seriously grow your operations after they are proven to be successful. Whatever your capital needs are, today, I want to provide some quick insights about the forms of funding available in Africa and how to access those funds.


Traditional bank loan

Of course we all know about that sort of financing, but many suggest that most banks in Africa are reluctant to give money away. I think having a good credit score at a bank and a strong business plan will considerably increase your chances. Banks want to invest, but simply not in just anyone who shares an idea. And don’t be discouraged when you are turned down – I read several stories where entrepreneurs knocked doors several times until they finally got a loan.

A traditional bank loan will leave you fully in charge of your business, all that is requested are regular repayments. This means you won’t need to give shares away.

African banks do fund SMEs and start ups and increasingly so.


Development Banks – loans and grants

Development banks such as the Development Bank of Southern Africa (DBSA) and the African Development Bank (AfDB) offer both loans and grant funding. They usually support large-scale public ventures, but they also run funding cycles for medium-scale private sector initiatives. This is ideal when you are looking for funding for a bigger project in agriculture or manufacturing for example. Have a look at the Fund for African Private Sector Assistance.

The application process is not easy and you need to have a strong development focus around your business, demonstrating that – while you make profit – your business directly helps Africa’s development. Job creation and employment, food security, manufacturing & value addition, and environmental protection are some of the areas a development bank would be interested to fund.

Loans need to be paid back and grants are free. They fund usually medium and large sized ventures, including start ups.


Development Finance Institutions (DFIs)

DFIs is a funding concept that is increasingly used by foreign governments to replace traditional aid concepts for Africa. DFIs don’t give away the fund, instead, they invest directly in commercial enterprises (your company!) that promise a good return of investment. This means that the money that was won through an investment will then be returned to the DFI. It can then either be given back to the donor country’s Government or they can be reused to invest into new projects.

What ought to be said is that they will often ask for a stake in your company, something around 30% is common, but on a positive note some DFIs prioritize the beneficial impact your business has on the wider community over the reaping of huge profits. Norfund is such a DFI and the UK’s Department for International Development (DFID) and USAID run similar funds. The African Agricultural Capital Fund for example is such a fund that has been set up by USAID in Kenya to support SMEs.

Or have a look at Sida’s Africa Entreprise Challenge Fund, which again, focuses on agricultural enterprises.

Some of the money is given not to you, the entrepreneur, but to local finance institutions in Africa, which then give loans to support small and medium sized businesses.

These kind of funds are usually run under the foreign ministries and official development departments of Western Governments, so search for websites and information online on their part or give them a call to find our which funds they run for Africa and how you can access it.


Private equity

Africa private equity is gaining popularity and has overall a very good reputation. The most well-known are based in the UK and South Africa, some in the UAE.

Private equity funds are managed by private equity firms. The funds are made of fund contributions from investors and the firms then look for valuable projects and appropriate partners in Africa to invest in. Right now there is enough funding available, the real struggle for private equity firms is to find local General Partners who have the necessary skills to run and expand projects.

Private equity is usually about taking on an matured company with existing products and existing cash flows, then restructuring that company to optimize its financial performance. There is much scope for that in Africa, because so many companies with great potential simply under-perform.

Most of their projects are large scale, so not appropriate for you if you are considering a small or medium start up.

Helios Investment and Actis are among the most known equity funds operating in Africa.

Angel investors & Venture capitalists

Angel investors or ‘angels’ are usually affluent individuals or groups who invest their own money in promising start-ups and early stage that promise a great scope for development and returns. They usually bring their own sector interests and experiences into your business, so it is important that you are aware of the area of interest of and they usually fund small to medium sized businesses.

Venture Capital…..and it’s getting complicated, because it is not always clear cut who funds what and how –  and in Africa financing approaches and terminology don’t painstakingly follow the global norm. But venture capitalists are usually investing in start ups within high growth sectors. And while this is often technology related in the rest of the world, the scope of venture capital investments spreads across several sectors in Africa.

VC4Africa is an online platform where you can ask for such kind of funding. But be aware that you need to upload a copy of your Chamber of Commerce registration or certificate of incorporation, a business plan and financial projections, before your fundraising request will be approved.


Other financial capital options for your business
  • Crowd funding is gaining popularity in Africa. It usually targets start ups and most of it is raised, allocated, and managed online. In South Africa namely StartMe, FundFind and the most recent ThundaFund to provide micro financing platforms. In Nigeria there’s StartCrunch while Kenya has M-Changa. In Ghana there is SlizeBiz , other new crowd funding platforms are JumpstartAfrica and Startup Africa Fund.
  • Call up or write to the African Guarantee Fund, which financially supports Partner Lending Institutions across Africa that fund SMEs in agriculture, agro industry, small and medium scale mining, oil and related services, manufacturing, building and construction, energy, telecommunications, transport, tourism, and trade. Well, you have to get in touch with them and find out if they have a partner lending institution in your country and who that is. Then you can apply there.
  • Homestrings allows you to register ‘an opportunity’ to raise funding for your business.
  • There are various challenge funds and business awards in Africa who make smaller grands (often around US$20,000) available to winners. So give it a go and apply


These are really just some examples to guide you into the right direction. One thing you need to be aware of: there is more than sufficient financial capital available for your African business, the real hurdle are to be prepared with strong business concepts and teams in which funders can confidently invest. Writing a strong executive summary and business plan (google it or pay for some professional help) and working on a top team will increase the chances that your business proposal will be accepted.

But in the end it’s also good to remain realistic: Just because you’re sure that your business deserves funding doesn’t mean that an investor will see it the same way. Don’t let that stop you from anything you want to achieve, if you have a strong will, you will find other ways to get to your goal.

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Dr. Harnet
Dr. Harnet Bokrezion is the Founder of and co-author of the book '101 Ways to Make Money in Africa'. She coaches individuals and consults existing companies assisting them to make smart and strategic business decisions in Africa’s new emerging markets faster and more confidently. Dr. Harnet also regularly writes for the renowned DHL powered publication Get in touch to inquire how she can be of assistance to your own Africa business endeavors:

User Comments ( 2 )

  • A great information shared. Thanks for it. Basically East African market is growing like anything. You can trust east Africa market for your business investment. You can have strategic partner to help you out in financial point of view.

  • Dr. Harnet

    Thanks for your comment, Cara! Very true – the East African Community (EAC) is one of the most dynamic and most popular markets in Africa at the moment. Strategic partnership is a great approach to solve your funding dilemmas – thanks for that, will write about it!
    And there are several entities in the EAC that can give you information about funding:
    – KenInvest
    – Ministry of Tourism (for tourist businesses)
    – offices of local business hubs
    just to name a few….