Find The Gap
Rajesh Savji Parmar
???????°???@????????????????????????????? ?????? ????s? ?? ?????? | ???????? ??? ????????? ??? ????
The Power of Crowdfunding: Transforming Africa's Financial Landscape
Have you heard of BRCK ?
It?is best?described as a “backup generator for the internet.�A rugged, rechargeable, mobile wifi device that brings robust connectivity to people in places with spotty?infrastructure –?particularly in developing countries.
The device is?the brainchild of Nairobi-based technology company?Ushahidi, and was created out of necessity and frustration with dropped internet connections and power outages in the city.
It turned to Kickstarter to launch a campaign and raised $140,000 from over 1078 backers. Since that campaign it has raised significantly more.
There are 410 million school children in Africa, according to the African Development Bank. The vast majority have little access to the internet.
Crowdfunding offers a path for the many from the many.
The Landscape
Africa is home to some of the world's fastest-growing economies and a rapidly expanding tech sector. However, despite these positive developments, access to finance remains a major challenge for entrepreneurs and small businesses across the continent. Fortunately, crowdfunding is emerging as a powerful tool to bridge the financing gap and promote financial inclusion.
Crowdfunding allows entrepreneurs to access capital from a wide range of investors, including the diaspora, impact investors, and global investors. This funding model has the potential to transform Africa's financial landscape by providing access to capital for startups and small businesses, thereby driving economic growth and job creation.
A birds eye view of the Continent
North Africa
Egypt, the most populous country in North Africa, is a major player in the region's startup ecosystem. The country has seen a rise in crowdfunding platforms, such as Bassita .
Another Yomken.com which has a unique approach to crowdfunding where it connects problem-solvers with funding from both individuals and businesses. The platform provides a marketplace where individuals or organisations can post problems that require solutions, and others can propose solutions and seek funding to bring them to life.
It has gained recognition for its innovative approach to crowdfunding and its impact in Egypt. Yomken.com currently operates in Egypt, Morocco, Tunisia, Jordan and Palestine.
Another is MADAD
According to the World Bank,Egypt's small and medium-sized enterprises (SMEs) account for over 90% of all firms in the country, yet they face significant challenges in accessing finance. Crowdfunding can provide a viable alternative for these businesses to access the capital they need to grow and succeed.
West Africa
Nigeria, with its vast population, presents a significant opportunity for crowdfunding to thrive. The country has a vibrant startup ecosystem, with platforms like Farmcrowdy , which is providing much-needed capital to farmers and small business owners. In addition, crowdfunding is helping to finance renewable energy projects, which are critical to the country's sustainable development.
"Alternative finance, which includes crowdfunding, is one of the fastest-growing sectors in the financial services industry globally. Nigeria cannot afford to be left behind in this evolution," - Adebayo Adelabu , former Deputy Governor of the Central Bank of Nigeria .
East Africa
Kenya is known for its pioneering mobile money system, M-Pesa, which has revolutionized financial inclusion in the country. Crowdfunding platforms like M-Changa Africa are now allowing Kenyans to pool resources to support community development projects, including education and healthcare.
Crowdfunding is also enabling small business owners and startups to access capital, which is helping to drive economic growth.
"The success of M-Pesa has shown that Kenya is a fertile ground for financial innovation. Crowdfunding is another exciting avenue that can help bridge the financing gap for small businesses and entrepreneurs," says Sir. James Mwangi , Group CEO of Equity Bank.
South Africa
South Africa is the most advanced economy in Africa, with a well-established financial services sector. Crowdfunding is playing a key role in supporting the country's entrepreneurial ecosystem. Platforms like Thundafund.Africa and Uprise - Embedded Financial Advisory .Africa are providing capital to startups and small businesses across a range of sectors, including tech, tourism, and agriculture.
Crowdfunding is an important part of the alternative finance landscape, which is gaining traction globally. It has the potential to democratise finance and increase access to capital for a wider range of entrepreneurs and small business owners.
Challenges to Financial Inclusion in Africa
Despite the potential benefits of crowdfunding, Africa still faces significant challenges in promoting financial inclusion. According to the World Bank, over 350 million people in sub-Saharan Africa do not have access to formal financial services.
"Access to finance is one of the biggest challenges facing entrepreneurs and small business owners in Africa. The lack of access to finance is one of the main reasons why many small businesses fail," says Tony O. Elumelu, C.F.R , founder of the Tony Elumelu Foundation.
In addition, other alternative finance options such as micro finance and peer-to-peer lending have also gained traction in Africa.
However, these models have their limitations, such as high-interest rates and limited access to capital. Crowdfunding has the potential to overcome some of these challenges by offering a more inclusive, accessible, and affordable financing option.
Global Investor Community and Impact Investing in Africa
Crowdfunding has the potential to attract a global investor community to invest in Africa's economic growth and development. The diaspora community, in particular, presents a significant opportunity for crowdfunding platforms to mobilise capital and channel it towards Africa's entrepreneurs and small businesses. Impact investors are also increasingly recognising the potential of crowdfunding to drive social and economic impact in Africa.
"Crowdfunding represents a valuable alternative financing model that could help the African continent overcome its financial exclusion challenges and create wealth for its people." - Solomon Asamoah , CEO of The Ghana Infrastructure Investment Fund
The Fintech Rule
Crowdfunding is emerging as a powerful tool to promote financial inclusion, drive economic growth, and create social impact in Africa.
领英推è
Despite the challenges, crowdfunding platforms are proliferating across the continent, providing entrepreneurs and small businesses with a viable alternative to traditional finance. With its potential to attract a global investor community and impact investors, crowdfunding has the potential to transform Africa's financial landscape and drive sustainable development for years to come.
"Crowdfunding is an opportunity to mobilize resources for entrepreneurship and innovation, leveraging technology and social networks to support businesses and social causes." - Makhtar Diop , Vice President for Infrastructure at the World Bank
Regulatory Environment for Crowdfunding in Africa
The regulatory environment for crowdfunding varies across Africa, with some countries having more developed frameworks than others. In some cases, crowdfunding is not explicitly regulated, leaving entrepreneurs and investors uncertain about the legal and regulatory requirements. This uncertainty can deter potential investors and limit the growth of crowdfunding platforms.
For example, in Nigeria, the Securities and Exchange Commission (SEC) introduced regulations for crowdfunding in 2020, aimed at protecting investors and promoting transparency. The regulations require crowdfunding platforms to register with the SEC and comply with disclosure and reporting requirements. Similarly, in South Africa, the Financial Sector Conduct Authority (FSCA) has developed a regulatory framework for crowdfunding, which includes disclosure and investor protection requirements.
In contrast, other African countries such as Kenya and Egypt have yet to develop explicit regulatory frameworks for crowdfunding, although efforts are underway to introduce regulations to support the growth of crowdfunding platforms.
Crowdfunding from Western Countries into Africa
Western countries are currently the most active in terms of crowdfunding for social projects and development in Africa. According to the World Bank, crowdfunding campaigns for Africa raised over $60 million between 2013 and 2018, with most of the funds coming from Europe and North America. These campaigns have supported a range of projects, from healthcare and education to agriculture and renewable energy.
For instance, crowdfunding platform, Indiegogo, partnered with Kenyan tech firm BRCK to raise funds for a project aimed at providing internet access to rural communities in Kenya. The campaign raised over $125,000 from over 2,000 backers.
Similarly, Germany-based crowdfunding platform, Startnext, has supported a range of social impact projects in Africa, including a project to provide clean water and sanitation facilities in a rural community in Tanzania.
The Long Game
I am a long term entrepreneur focused on solving issues through tech in Africa. I have been (for good or bad) intrinsically entangled in a journey that for me began in Barcelona but actually was passed down to me by the journey of my own parents from Kenya and Uganda to the UK.
My own travels across the African continent have given me that MBA that no business school could ever award. You have to be on the ground. Entrenched. Empathetic to the lives, the culture, the ambitions, the hardships.
The Cradle of humankind that was also the continent that gave birth to the first fintech (arguably the most important in M-PESA Africa ).
The idea that startup, scale-up, blitz scale, exit are applied to the tech and fintech world across this region are a sign that the Western investors, entrepreneurs and regulators have not learned about the realities on the ground.
It is not Silicon Valley, its not London, however it is something quite extraordinary based on the demographic story.
You are investing in longterm trends when you put money down in a market, and one of them is the sizeable youth population in African markets.
There are around 1.4 billion people today, with the expectation that Africa will be around 4 billion by 2100.
The continent maybe run by the elders but the majority are incredibly young. In Nigeria alone, there are 82 million people under the age of 20, and they are?all born into mobile.
Digital natives raised in an environment of mobile connectivity, which means there alone you have a target audience.
Once you solve the inefficiencies of the markets, including investment into infrastructure, capacity building and by ensuring that urbanisation of African cities supports migrants and provides the opportunity for work and trade (there is a lot to do here and its not just pegged to AfCFTA), then you are unlocking more investment opportunities for the wider world.
There are real risks to investing in Africa (like anywhere) but as we have seen with the recent trips by US Heads of State, there is a real recognition that a fleeting interest in what is the biggest development opportunity on the planet will need to see a full embedded drive.
Job creation for such a young continent is going to be a major factor in who wins the trade war with the continent.
However it is not a one size to one market fits all scenario and due to such fragmentation, the real winners will be those that can stay for the long haul.
I often hear the term "brain drain" which alludes to the loss talented migrants to the wider world.
In reality it is that exit which provides financial assistance to their families back at home (via remittances).
As the geopolitical situation supporting mass migrant mobilisation is becoming more complicated (post the Ukraine War and with channel crossings into the UK for example), the future for Africans will rely heavily on FDI and ODA and other alternative investment regimes to ensure the ability to work.
Little wonder everyone in the continent is literally an entrepreneur!
The benefits far outweigh the risks. In my opinion.
Crowdfunding is an opportunity to scale at scale and give impact investors, donors a chance to take a very early position and contribute in a meaningful way.
Conclusion
Crowdfunding has the potential to promote financial inclusion and drive economic growth and social impact in Africa. However, regulatory challenges and limited access to finance remain significant barriers to the growth of crowdfunding platforms across the continent.
Efforts are underway to develop regulatory frameworks that support the growth of crowdfunding, but more needs to be done to promote awareness and understanding of crowdfunding among entrepreneurs and investors.
Western countries are currently the most active in terms of crowdfunding for social projects and development in Africa, but there is significant potential for crowdfunding platforms to attract a global investor community and drive sustainable development in the continent.
A Piece of the Pie?
I am currently head down and building a new venture called Indelible . My partners in Ghana and i are busy beavering away but we are happy to share our progress with you.
I am particularly interested in meeting potential investors, sponsors who are keen to enter Africa.
Complete the Typeform and book a meeting today.
Digital Growth Strategist | Website, App & Software Development | CEO & Founder | Empowering 150+ Business Transformations
1 å¹´Excited for the next edition of "Find The Gap"! Can't wait to learn more about the #crowdfunding landscape in Africa. #Innovation #Investment #Fintech #Entrepreneurship #Startup