A recent report titled ‘Debt Financing in Africa’s Innovative Ecosystem’ by Briter Bridges, a research and market intelligence organization, has unveiled that tech startups in Nigeria have successfully raised over $415 million through approximately 40 deals in the past 10 years.
The broader context reveals that African startups collectively acquired a total debt funding of $2.1 billion between 2014 and 2023. Kenya emerged as the leader in this debt funding trend, securing over $800 million across 60 transactions. Nigeria ranked second, with its entrepreneurs obtaining $415 million in 40 deals during the period under review.
The report highlights that more than 75% of the debt investment in African entrepreneurship originated from the top four countries: Nigeria, Kenya, Egypt, and South Africa.
Notably, the rise in debt financing in Africa’s startup ecosystem has been attributed to a decline in equity funding over the past five years. The research indicates that debt, as a share of the total funding volume to ventures in Africa, surged from 4% to 26% between 2019 and H1 2023. The decrease in equity funding from $2.6 billion in 2022 to $1.4 billion in 2023 has been a significant factor driving this shift.
The report notes, “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 drivers of debt’s rise in Africa’s startup ecosystems may be the dramatic fall in equity funding.”
According to Briter Bridges, the majority of loan investment is directed towards businesses with collateral, with over 75% of debt funding going to cleantech, mobility, agriculture, and logistics enterprises exhibiting high asset concentration.
Despite the overall increase in debt financing for African entrepreneurs, the distribution has not been uniform across industries. Industries with collateral assets, such as fintech and cleantech, attracted the most significant investments. Cleantech accounted for approximately half of the announced loan funding between 2014 and H1 2023, with pay-as-you-go products and solar house kits being the primary beneficiaries. Fintech saw 25% of debt capital directed towards buy-now-pay-later and asset finance.
Notable debt deals during this period include $200 million raised by the Kenyan startup Mkopa, $130 million by another Kenyan startup, Sunking, and $50 million by the Nigerian startup Lumos.