Where Is the Money?: A Practical Guide to Raising Capital in Africa

The kind of capital a project needs, and

The way that the project is prepared, structured, and presented.

Members contribute regularly and take turns receiving a lump sum.

Some groups now invest in land, housing, small businesses, or buy equipment together.

Take deposits

Provide small loans to members at lower rates than microfinance or digital lenders

Sometimes invest collectively in income-generating projects

Small ticket sizes, often from a few hundred to a few thousand dollars

Short tenors, frequent repayments

Higher interest rates, but more accessible than banks

Very fast approvals

Useful for short-term working capital

Often very high effective interest – good servant, bad master

Require basic financial records, bank statements, and sometimes collateral

Offer overdrafts, term loans, and sometimes invoice or asset finance

Cost is moderate compared to MFIs and digital lenders, but access can be tougher

Common in retail, wholesale, and agriculture

Reduces the need for cash upfront

You “finance” your working capital through negotiated terms

Pre-finance inputs (seed, fertilizer, packaging)

Deduct costs when you deliver the produce or goods

You sell or discount your invoices to a financier and get cash immediately

Especially useful when you supply the government or large corporates who pay slowly

Several banks and specialist fintechs in Africa now offer this

In agriculture, you store produce in a certified warehouse

The warehouse issues a receipt, which a bank accepts as collateral

You avoid “fire sales” after harvest and can wait for better prices

Instead of paying cash for a vehicle, machine, or equipment, you lease it

The financier owns the asset; you pay monthly and can often buy it at the end of the lease period

Common for trucks, taxis, machinery, medical equipment, and solar systems

Financiers provide capital, and you repay as a fixed % of your monthly revenue

No fixed installment; payments go up or down with your sales

Emerging model in African tech, creative industries, and digital SMEs

Wealthy individuals (often entrepreneurs or professionals) invest their own money

Provide small equity tickets or convertible loans (e.g., $10k–$250k)

Often give mentorship and networks, as well as money

Look for: local angel networks, diaspora groups, business clubs

Focus on high-growth startups, especially in tech, fintech, e-commerce, healthtech, edtech, and clean energy

Ticket sizes range from the low hundreds of thousands to millions of dollars

Expect rapid growth, strong teams, and scalable models

Located both in Africa and abroad (often via Africa-focused funds)

Invest in businesses that produce both financial returns and social/environmental impact

Common in: off-grid solar, health, education, agriculture, affordable housing, waste management

Can be more flexible than pure commercial VC in terms of return expectations and tenors

Provide small amounts of capital plus training, mentorship, and investor introductions

Often backed by donors, DFIs, or corporates

Good for early-stage entrepreneurs building structure and networks

Youth and women's funds

Development banks or SME windows (e.g., Bank of Industry in Nigeria, SEFA in South Africa, national development banks in several countries)

Credit guarantee schemes to share risk with commercial banks

Donors, NGOs, and foundations provide grants for specific sectors (e.g., agriculture, climate-smart solutions, digital innovation)

Typically, competitive application processes

Non-dilutive (you don’t give up equity), but project-specific and often time-bound

Lend to local banks with instructions to on-lend to SMEs

Invest in SME-focused funds or platforms

Offer technical assistance to help SMEs become bankable

Donation-based: supporters give money for a cause or product

Reward-based: pre-selling your product or service

Equity-based: selling small ownership shares online

Regulation is evolving in many African countries; always check legal requirements

Loans or equity from Africans abroad, often combined with mentorship

Some countries are piloting diaspora-focused SME funds

Strong potential where trust and family ties are high

Overdrafts for day-to-day working capital

Term loans for equipment, expansion, and acquisitions

Syndicated loans for larger projects, often cross-border

Letters of Credit (LCs)

Bank guarantees and performance bonds

Supply chain finance and receivables finance

Issued on local capital markets (e.g., JSE, NSE, EGX, BRVM, NGX, etc.)

Commercial paper for short-term funding (usually under 1 year)

Bonds for longer-term funding (3–10+ years)

Audited financials

Credit rating (often)

Compliance with listing and disclosure rules

Raise equity from the public

Improve visibility, governance, and liquidity for shareholders

Comes with reporting obligations and market scrutiny

Ticket sizes often range from a few million to tens of millions of dollars

Sectors: financial services, FMCG, healthcare, education, logistics, manufacturing, energy, etc.

Hands-on: help with strategy, governance, professionalisation

Sits between debt and equity (e.g., subordinated loans, convertible instruments, preference shares)

More flexible than pure bank loans, less dilutive than common equity

Common in management buyouts, expansion, and restructuring

Trade players (regional champions, multinationals) investing to enter or grow in a market

Bring: capital, technology, skills, access to new markets

Often formed as JVs, minority stakes, or acquisitions

Established corporates investing in startups and innovation ventures

Growing in telecoms, banking, energy, and retail across Africa

Useful for startups looking for capital and a strong distribution partner

ECAs (e.g., from China, US, Europe, India, etc.) can provide buyer’s credit or guarantees

Typically long-term, with competitive rates for qualifying projects

Common in power, transport, manufacturing, telecoms

Financing large projects on the basis of the project’s cash flows, not only the sponsor’s balance sheet

Often structured through a Special Purpose Vehicle (SPV)

Used in energy, infrastructure, PPPs, and large industrial plants

Combining concessional money (from donors/DFIs) with commercial capital

Tools: guarantees, first-loss capital, subordinated debt

Lowers risk for private investors in priority sectors such as climate, agriculture, and social infrastructure

Governments regularly issue short-term T-bills and longer-term bonds in local currency

Bought by banks, pension funds, insurance companies, and individuals

The foundation of domestic financing and a benchmark for interest rates

Some larger cities and regions issue their own bonds (where the law allows)

Used for infrastructure like water, roads, and housing

Requires strong creditworthiness and transparency

Issued in international markets, typically in USD or EUR

Provide large sums for infrastructure and budget support

Expose the issuer to currency risk – a major issue when currencies depreciate

Use-of-proceeds linked to specific outcomes (climate, social, SDGs)

Often attract specialised ESG investors

Potentially better pricing and longer maturities if structured well

Sharia-compliant instruments backed by underlying assets or projects

Attractive for countries with significant Muslim populations and access to Gulf and Asian investors

Already used by several African countries at the sovereign and sub-sovereign levels

World Bank (IBRD/IDA), African Development Bank (AfDB), Islamic Development Bank (IsDB), and others

Provide long-term, often concessional loans and grants

Focus on infrastructure, social sectors, policy reforms, climate, and private sector support

China Exim, China Development Bank

AFD (France), KfW (Germany), JICA/JBIC (Japan), etc.

USAID/DFC, FCDO/BCI, and other national agencies

Infrastructure, energy, water, transport, health, education

Sometimes tied to goods and services from the lender’s country

Used for large import-heavy projects (rail, power, ports, defense, aviation)

Backed by ECAs from exporting countries

Often long-term and relatively competitive if structured properly

Private sector finances, builds, and/or operates public infrastructure under contract

User fees or government payments (availability payments) repay the investment

Can reduce immediate fiscal pressure but still create long-term obligations

Mix of grants, concessional loans, guarantees, and private capital

Deployed through global climate funds and initiatives targeting:

Domestic SWFs (e.g., in Nigeria, Angola, Ghana, and others)

Foreign SWFs from the Middle East, Asia, and elsewhere

Can invest in infrastructure, real assets, and co-invest with private and development partners

Bonds marketed to the country’s diaspora, often with a patriotic appeal

Can be cheaper or more stable than purely market-based funding if trust is strong

Some countries also use remittance flows as collateral for borrowing

Government securities

Bank deposits

Blue-chip listed equities

Infrastructure bonds and funds

Private equity and venture capital

Real estate and affordable housing vehicles

Green and climate-focused instruments

There is a deepening pool of local long-term capital that does not have the same FX risk as foreign loans

But tapping it requires: robust governance, transparent structures, proper regulation, and credible project preparation

Use short-term debt (overdrafts, trade finance, short loans) for working capital

Use long-term debt or leases for assets and infrastructure

Use equity or quasi-equity for riskier growth, innovation, and scaling

Use blended structures where risks are high but impact is strong (climate, frontier regions, new technologies)

Clean, reliable financial statements

Clear ownership and governance structure

Realistic business model and projections

Proper handling of permits, land, and regulatory issues

Risk analysis and mitigation (e.g., FX hedging, guarantees, insurance)

Attention to ESG (environmental, social, governance) – increasingly non-negotiable