africa Banking Capital market development Economy Finance Private Equity

Seven sources of funds to start your business in East Africa

Approximate reading time: 4 minutes

Banks charge a huge interest rate and ask for so much in guarantee, thing that eventually cut out startups from accessing some of these services.

 

Starting a business in Africa requires more than just setting up a shop and selling stuff to people. It requires one to be well prepared for anything.

Source of funding for businesses is one huge hurdle that young investors grapple with. This is because banks charge a huge interest rate and ask for so much in guarantee, thing that eventually cut out startups from accessing some of these services.

The Exchange has compiled a list of alternative source of funds that could benefit startups.

Savings

When you plan to start a business, get a timeline drawn on when you plan to have the business rolled out. If you are working, use that time to maximize on saving every month in order to achieve the set target in terms of the amount of capital needed for such a venture. It is also important to research on some of the challenges and expectations associated with the business venture. This way, you will already have prepared well enough in case you meet hurdles threatening the running of your operations.

Savings and Credit Co-Operative (SACCO)

In case the amount you have saved up is not enough to start a your business, then you may want to invest that money in a SACCO.

What SACCOs do is they place you on a platform that allows you to borrow up to three times of your total savings. This will give you access to more finances to start your business. Be sure to invest in SACCOs that have already been registered under the government’s regulatory authority. This will shelve you from fraudsters who amass money from desperate individuals and sink with it.

Borrowing from friends and relatives

Depending on who is in your circle of friends as well as how trustworthy you are with money, this could actually one of the cheapest form of raising capital to start your business.
To be safe, you better draw an agreement between yourself and the lender to ensure that both parties are well protected. This way even if something comes up, you can always go back to the contract and clarify.

Venture Capital

These are the firms whose business is in helping your startup to get a chance at climbing to a higher level.

Under their umbrella body named the East Africa Venture Capital Association (EAVCA) the representative organization for private equity and venture capital funds in East Africa. It has a growing membership of private capital investors and advisors looking at the region for growth. To benefit from these you will need a solid business plan sure to convince the firm you approach that in deed you have what it takes to take your business to the next level.

UNICEF innovation fund

In 2016, United Nations International Children’s Emergency Fund (UNICEF), launched an innovation fund seeking to help people grow their businesses that help offer solutions to children’s lives. So if your business is aligned with this initiative, you stand a chance to get access to the funding you have been looking for to expand your business. The Innovation Fund allows UNICEF to quickly assess, fund and grow open-source solutions that can improve children’s lives. Financial and technological support is available for companies that are using technology in innovative ways to improve the world.

Mango Fund

Based in Uganda, the firm is an impact investment fund that seeks to encourage economic development in emerging economies by getting behind local entrepreneurs – especially those that are performing value addition activities within their countries.

“We seek to support the “missing middle” – entrepreneurs that are too big for microfinance institutions, but too small to access loans from the banking sector.” Reads a statement on its website, adding that, where others see challenges, Mango Fund sees opportunities.

The firm thrives in providing both financial and consulting services in an unconventional manner, Mango Fund helps entrepreneurs access state-of-the-art technology and working capital to climb up the value chain, grow, and expand to international markets.  The firm focuses on sectors crucial for the future of the East African economy like manufacturing; agro-processing; technical farming and medical services among others.

Crowd funding

This is another way to raise money to start your business. This is how it works. Usually there will be an online platform that allows individuals, entrepreneurs and small businesses to set a goal for funding. Your innovative idea needs to be so good it will trigger the donors to throw money at you.
There are several crowd funding platforms in East Africa. One such platform is Lelapa fund.

This is an innovative fintech start-up company that helps impact funds, angel syndicates and development institutions reduce their transaction costs on small-sized investments in Africa. Focused exclusively on small SME deals, Lelapa reduces costs for its clients by combining high-touch SME investment readiness with data-driven due diligence tools. Lelapa fund has operations in Nairobi, Kenya and Paris, France.

Another similar one is M-Changa which is one of Africa’s largest Online Fundraising Platform. Mchanga provide the most Secure, Transparent & Convenient way to raise funds in Kenya. Mchanga’s fundraisers include: Medical, Funeral, Weddings, Churches, Businesses, Education, Projects, Sports, Construction & Disasters.

Source: The Exchange

Advertisements

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.