Debt Financing in Africa’s Innovation Ecosystem

Over the last five years debt financing has been on the rise in Africa’s innovation ecosystem. From 2019 to H1 2023, debt as a share of the total volume of funding to ventures in Africa increased from 4% to 26%. However, it is not necessarily the exponential rise in debt that is driving this increase. Based on data available, disclosed debt appears to have grown slower than equity from 2019 to 2022.

So what is going on?

While debt is certainly playing a role in Africa’s startup ecosystem and innovations on the financing side making it more accessible, one of the biggest driver of debt’s rise in Africa’ startup ecosystems may actually be the dramatic fall in equity funding, which fell from $2.6bn in 2022 to $1.4bn in 2023. A nearly 50% drop off. This is not only affecting companies, but investors as well who are also struggling to raise their funds and showing returns, which results in a greater push towards alternatives to equity. Yet, while debt certainly has a role in Africa’s innovative ecosystems, it is not a silver bullet. 

What’s in this report?

In this report we look back at a decade worth of ecosystem data to examine the drivers of debt financing in today's ecosystem, the current state of debt financing and the opportunities and challenges that debt presents for Africa’s businesses going forward.