How startups can unlock alternative capital for their operations

Africans give a lot to churches and mosques, and this money can be channeled to fund businesses that would have a positive impact in their societies. [iStockphoto] The Chief Executive of Africa Venture Philanthropy Alliance (AVPA), Dr Frank Aswani, holds a wild thought on domestic capital mobilisation for entrepreneurs: If churches can build hospitals, schools and run them profitably, why can't they also invest in startups? According to his observation, this is one of the funding avenues that economies like Kenya can pursue, instead of relying on foreign inflows. This money, while always available, is not suitable for economies on the continent, he says. "Right now, the problem we have in Africa is that, too much of the money that comes to solve our problems is foreign," he said. "That comes with terms and conditions, sometimes that are not very suitable to us." This money, he adds, also comes at a cost of capital that probably most economies in the region cannot afford. "We take this money in dollars and we have to pay in two or three years and by that time, there is devaluation so you are paying back at a much higher premium," he said during an interview on the sidelines of the AVPA annual conference held in Nairobi. The three-day conference brought together close to 400 delegates from over 30 countries under the theme 'Driving Sustainable Investments and Innovations for Resilient Growth'. Cultural intelligence The delegates included government officials, philanthropy offices, foundations, wealth managers and representatives from family offices. They discussed how to make capital available for businesses in the continent in a way that is profitable and impactful. Aswani said the abrupt withdrawal of funding from the United States Agency for International Development (USAID) by President Donald Trump shows how undependable foreign funding is. He said a key challenge with foreign funding is that the money does not have the patience and the cultural-know-how of local economies. "It comes in sometimes not having the cultural intelligence or local context around what needs to be solved or how it should be resolved," said Aswani. He said capital inflows in Africa need patience because some of the problems being solved with the said cash have been on the continent for a long time. This is the reason why local capital is more suitable for impact investment on the continent. He refers to this as 'afro-unique' sources of capital. These are sources of capital that are unique to the African context. "Like faith-based investing," he said. Aswani said Africans give a lot to churches and mosques, and this money can be channeled to fund businesses that would have a positive impact in their societies. "How can we use that creatively? Can you imagine if we have churches, which for a long time have participated in building hospitals and schools, coming in as early-stage investors for youth entrepreneurs?" he posed. Additionally, saccos and cooperatives are lying in a large pool of members' savings which can also be harnessed for the same purpose. "We have a lot of normal structures like chamas that we can get more creative on how we use that capital," said Aswani. Major sectors According to the Kenya Investment Authority (InvestKenya), the United States is the country's leading contributor to foreign direct investment (FDI). Data from the authority shows in 2024, FDI from the US stood at Sh44.1 billion ($339 million), Sh31.6 billion ($243 million) came from China, Sh26.7 billion ($205 million) from Japan, Sh26.3 billion ($202 million) from the United Kingdom, and Sh19.2 billion ($121 million) from France. In total, Kenya received Sh195.4 billion ($1.5 billion) as FDI in the year 2024. The major sectors where this money is invested include infrastructure and logistics, agriculture, energy, manufacturing, ICT, services and trade. Speaking previously during a private sector forum made up of businesses from the Sharjah Chamber of Commerce and Industry (SCCI), InvestKenya Chief Executive John Mwendwa noted that technology plays a key role in these figures. He pointed that on technology, Africa raises about Sh156 billion ($1.2 billion). "Kenya raised about Sh91 billion ($700 million). So, 70 per cent of startup funding on technology in Africa is raised in Kenya," he said. Bidco Africa board Chair Vimal Shah, who took part in the conference, said there is a lot of capital on the continent. Much of it, however, could be sitting in foreign accounts. "Africa cannot rely on aid. Capital that builds industries is not aid," he said. He added: "We must mobilise African capital through pension funds, sovereign wealth funds, private investors and we must invest in manufacturing, agriculture, green technology and skills and digital systems." Shah said the continent's prosperity will come from factories and not fortunes from abroad because that has not helped the continent. "We also need an execution mindset, ideas inspire but actions transform," he said. He said when it comes to impact investment, manufacturing and the agriculture value chain has immense potential. It is the reason why Bidco Africa is in the sector adding that it is not just a business model but also a vehicle for transformation. "Every product made in Africa feeds a family, strengthens a farmer, supports a community and secures a future," he said.

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