How to finance your project in Africa?

The writing of this article is motivated by the incessant request of several subscribers of Finance de Demain. In fact, the latter say they have difficulty raising funds to finance their investment projects, their Start-ups. In reality, obtaining the funds to finance a project is something essential for the sustainability of the project. Finance of tomorrow comes today to answer the following question: How finance your project in Africa ?

However, it is not often easy to find financing to set up your project. In all cases, the nature of the project and the activity of the company generally determine the choice of financing. In this article, I will present the different ways to finance your investment project in Africa. But before you start, here is a protocol that will allow you to build your first internet business.

Difficulties in financing a project in Africa

Financing your investment project has never been an easy thing. Even worse when you are on the African side where banks are reluctant to finance SMEs. The lack of guarantees to ensure credit is one of the reasons why financing banking is difficult in Africa. However, there are several new solutions that allow you to get around these difficulties. Some are faster to obtain than others but allow you to benefit from less money.

It is therefore particularly important to understand the stages of financing and to choose the right source of financing in order not to waste time and increase your chances of success. It is also necessary to take into account the fact that certain sources of financing are only possible once your company has reached an already advanced stage.

Financing your investment project

This article presents you with the different possibilities of financing projects that are little known to the general public. These techniques offer young entrepreneurs who do not know where to go new chances to finance their projects. Overall, this article presents six financing possibilities available to African start-ups: self-financing, Love Money, Business Angel, Islamic Financing, Crowdfunding, competitions and scholarships.

✔️ Self-financing 

Self-financing refers to the financing of company projects without recourse to external resources such as borrowing. The " Start-ups » Africans must place particular emphasis on this source of financing which allows them to be more autonomous. Even if some entrepreneurs mention the lack of these funds at the time of launching their project, it should be noted that an ambitious entrepreneur would be ready to get out of your comfort zone to embark on parallel activities in order to generate income which will subsequently constitute the capital of the Start-up.

In addition, he can call on the partners (Co-founders) to self-finance his project. It's a question of will, organization and above all ambition. This source of funding is particularly important at the start-up launch phase. When you have an idea in mind, you have to try to quickly make it a reality, even if the product or service is not yet finalized. This allows you to quickly test the idea on the market and avoids wasting time developing a product that may not work with the public. This is why, you have to be prepared to self-finance.

✔️ Love Money (“money of love”, in French)

Love money is a source of finance is unknown to the general public. This source of financing makes it possible to circumvent the eternal problem of guarantees requested by conventional banks. Love Money is a financial alternative to traditional credits provided by banks. It consists of financially involve loved ones in the establishment or development of his business. This financial involvement is formal: relatives become shareholders of the company.

Thus, love money is also called " the 3 Cs: cousins, friends and weirdos ! Love Money is part of the logic of the "African solidarity". That is to say altruism, the sharing of certain values. Love Money is mainly used in the context of setting up the share capital of a company being created, but can also, if necessary, be used in the context of a recapitalization after the launch of the company.

✔️ Islamic financing

Whether you are a Muslim or not, the Islamic finance opens its doors to you. Young African entrepreneurs who are looking for funds to finance their projects can resort to Islamic financing in order to benefit in whole or in part from the financing of the project. In fact, Islamic finance is a finance that advocates transparency in business, fairness between the parties to the contract, etc. In one of our articles, we showed that some Islamic financial contracts can finance all or part of an entrepreneur's project.

Islamic finance has significant advantages over traditional financial products. Her prohibition of interest and requirement That investments are linked to the real economy, as well as its approach to sharing profits and losses with entrepreneurs, adds stability to the financial sector. Islamic finance can also improve financial inclusion, as it integrates people who, for cultural or religious reasons, are excluded from the traditional financial system.

Finally, the young Start-upeur can benefit from benevolent loans from Islamic banks. Since conventional banks do not offer loans without guarantees and at interest rates that are often unbearable for the Start-up, this source of financing is an opportunity to seize. This solution is precisely more appropriate for those who have innovative ideas but do not have funds.

✔️ Using a business angel

In recent years, we have seen the development of venture capital companies or Business Angels. The Business Angels are passionate about entrepreneurial adventure who invest their money in young companies with innovative concepts. These independent individuals can finance a project in any sector of activity provided they have an affinity with the entrepreneur. It is enough for him only to have a good general impression of the project and that the project is potentially profitable.

These people who are looking for interesting investments can perfectly help you finance your business. In addition to financing your start-up, business angels advise you on how to manage your project. Thanks to their responsiveness and their low risk aversion, Business Angels are essential players in the initial financing of young companies with high growth potential.

They are the only ones capable of assuming this role on a large scale. In general, they benefit from shares in your company. Internet research allows you to present your project to a Business Angel.

✔️ Crowdfunding

Crowdfunding is an English term for a “ crowdfunding ". This means that a large number of people are brought to participate financially and economically in a project. This practice is mainly done through the internet. Crowdfunding allows you to'get in touch with financiers' who act either as a philanthropist or as a merchant. From Africa, (04) four platforms exist to finance your young businesses.

Afrikity offers a fundraising service via crowdfunding. As presented above, this technique allows the public to invest in the capital of startups and SMEs. The site also offers a complete service around the administrative and legal aspects of your projects.

FADEV supports entrepreneurs in Africa who apply the values ​​of a social and solidarity economy. It is possible to obtain financing for your business. The project must already be firmly established in order to qualify for the funds.

Jamaafunding is a crowdfunding site like no other. In addition to money, you can also donate your time by participating in on-site volunteer operations available on certain projects.

FIATOPE is a crowdfunding platform by donation, dedicated to entrepreneurs' projects towards Africa. Fiatope's priority areas of action are: higher education, medicine, the environment, renewable energies, agriculture, technology and culture.

✔️ Competitions and scholarships

Start-up incubators in Africa are multiplying partnerships with companies providing them with seed grants. This is the case of the CTIC in Dakar, which launched the BuntuTeki program in 2015 in collaboration with the telephone operator Tigo.

The objective of this partnership is to support around ten projects per year in Senegal. The young entrepreneur must therefore from time to time go on the internet to search for competitions and scholarships available in his field.

✔️Grants

Grants are funds allocated by government or private organizations for specific projects. They are usually awarded to projects that have a positive social or environmental impact. Grants are generally less competitive than other forms of funding and do not require repayment.

✔️The personal loan

Personal loans are a flexible and convenient means of financing for projects with a tight budget. They are generally easier to obtain than a bank loan and do not require collateral. However, interest rate may be higher than other forms of financing.

✔️ Leasing

leasing, also known as lease, is a form of financing that allows a business or individual to lease an asset, usually equipment or a vehicle, for a specified period of time. Leasing provides the ability to use the asset without having to purchase it outright.

In a lease agreement, the lessor (usually a leasing company) purchases the desired asset and leases it to the lessee (the business or individual) for regular payments over an agreed period. At the end of the lease agreement, the lessee can usually choose to purchase the asset at an agreed price, return it to the lessor, or renew the agreement.

Leasing has several advantages. It allows you to retain borrowing capacity for other needs, since the asset is not purchased outright. It also offers flexibility in terms of lease term and the ability to upgrade equipment. In addition, lease payments may be tax deductible in some cases. Learn more about leasing financing.

Strategies for Financing a Project on a Tight Budget

A project with a tight budget is a project that has few financial resources for its realization. It means that the funds available for the project are limited, which can make it difficult to implement certain ideas and achieve set goals. Projects with tight budgets are often associated with startups, art projects, social projects and other similar initiatives.

In these cases, entrepreneurs or creative people are often forced to find innovative ways to maximize their funding and complete their project with the least possible resources. When you are working on a project with a tight budget, it is essential to maximize your funding to be able to achieve your goals without exceeding your financial means. Here are some strategies to consider to maximize your project funding:

✔️Evaluate the costs of your project

Financing a project on a tight budget can be a real challenge, but it can also lead to greater creativity and ingenuity in carrying out the project. Before seeking financing, it is important to assess the financial viability of your project. This involves determining the total cost of the project and ensuring that you have a solid plan for generating revenue or profit once the project is completed.

The first step to maximizing your financing is to assess the costs of your project accurately. Consider all potential costs, including materials, labor, equipment rental, and marketing costs. Be sure to account for unexpected expenses that may arise during the development of your project.

✔️ Establish a realistic financing plan

Using the estimated costs, create a realistic financing plan that considers all potential funding sources. Consider loans, grants, investors, donations, scholarships, and other financing options to determine how you can maximize your funds.

✔️Research grants and scholarships

Grants and scholarships are popular sources of funding for tight-budget projects. Research the grants and scholarships available for your project and ensure you meet all qualification criteria before submitting an application.

✔️Explore loan options

If you need additional funds for your project, consider exploring loan options. Loans can be an effective source of financing, but make sure you understand the terms and conditions before signing an agreement.

✔️Build partnerships

Working with partners can be an effective way to maximize funding for your project. Look for partners who can provide funding, expertise, or resources for your project. Partnerships can help share risks and costs, which can be beneficial for tight budget projects.

✔️Use social media

Social media is a powerful marketing platform to promote your project and attract the attention of potential investors and donors. Create an online presence for your project by using relevant hashtags and sharing regular updates on your progress to generate interest and attract investors.

✔️Be creative with your funding sources

Be creative and think outside the box to maximize your funding. Consider alternative financing sources like crowdfunding or microcredit to obtain the necessary funds.

Conclusion

In conclusion, financing your project in Africa can be a challenge, but there is several options to explore. First, you can look for investors who are interested in your project. Prepare a solid business plan and highlight the benefits and profitability potential of your project to attract their attention. Then, the venture capital fund are another possibility. These specialized investors support startups and projects with high growth potential. Conduct a search to find active venture capital funds in Africa and submit your project for evaluation.

Government grants can also be a source of funding. Find out about grant and incentive programs offered by local or national governments. If your project has a social or environmental dimension, it may be eligible for these grants.

Online crowdfunding platforms can also be a great option. Create an engaging campaign and use social media to promote your project to a wide audience. Crowdfunding can help you raise funds quickly and gain community support.

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