A Case For Credit
4 mins read
African entrepreneurs need access to affordable and flexible financing to bridge the gap between potential and progress.
It is an undeniable fact that money powers societies. Beyond a means of exchange and a store of value, money is a measure and a driving force of growth for people across the world. Access to money empowers people to progress, whether they’re taking an online course, furnishing an apartment or building financial stability.
For entrepreneurs, money is an even greater resource; it is the capital that fuels innovation and enables them to build their ideas into successful ventures. These ventures contribute immensely to economic growth by creating jobs and generating wealth that ultimately elevates the overall prosperity of nations. Micro, Small, and medium enterprises (MSMEs), in particular, play a critical role in this ecosystem serving as the backbone of local economies and driving sustainable growth through their agility and adaptability.
This fact holds especially true for Africa, where the World Bank estimates that small businesses account for 90% of all businesses. According to an MSME Intelligence Report by Stears, MSMEs contribute 40% of Africa’s GDP and employ 80% of the continent’s workforce. Despite these immense contributions to economic growth, African entrepreneurs still face significant obstacles to progress, the principal among which is a lack of access to capital.
When launching their businesses, many entrepreneurs rely on personal savings or financing from family and friends to raise initial capital. However, these sources are often limited and unsustainable, forcing MSMEs to operate on tight budgets that limit their ability to seize growth opportunities. This is where credit comes in.
Credit can be a game-changer for MSMEs, offering the financial boost they need to scale beyond their immediate means. With access to structured financing, entrepreneurs can invest in essential resources—from upgrading equipment and expanding inventory to hiring skilled employees and exploring new markets. Credit facilitates the flow of capital and empowers MSMEs to stabilize and strengthen their operations, setting them on the fast track for growth.
Let’s bring this home…
For Fola, a tech startup founder, venture debt financing can provide crucial capital to fuel rapid growth, bridging the gap between equity rounds and enabling investments in talent acquisition, product development and marketing — ultimately positioning the startup for long-term success and increased valuation.
For Chizaram, a freelance content creator, access to Buy Now Pay Later (BNPL) credit can enable her to purchase essential equipment, such as a high-end camera or editing software, allowing her to enhance the quality of her work, attract more clients, and increase her earning potential.
For Alhaja Memunat, who runs a lace business, access to inventory financing can provide her with the necessary capital to purchase larger quantities of high-demand fabrics, allowing her to meet customer demands, negotiate better prices from suppliers, and grow her business by increasing sales and profit margins.
For James, a rideshare driver, access to a revolving line of credit can enable him to promptly address necessary repairs, purchase fuel and cover other car-related expenses — ensuring consistent service for his clients, maintaining a high driver rating, and keeping his business running smoothly.
These are only 4 of the millions of use cases for credit among entrepreneurs, for whom credit is a lifeline for progress.
However, even access to this lifeline is limited for entrepreneurs in Africa, where the market faces a $331 billion lending gap. While traditional financial institutions offer business loans, entrepreneurs often lack the credit history and collateral to meet the strict eligibility requirements for these services. Many turn to microfinance banks, who often have less stringent credit requirements, but soon find that their growth needs do not match what MFBs can offer. Thus, MSMEs remain in survival mode, with growth a visible but unattainable concept.
But we can change this.
It’s time to rethink financing for a new generation of business leaders—a generation who have broken the barriers of what it means to be an entrepreneur. If Chizaram can run a business with just her mobile phone, she deserves access to financing that is just as innovative. By harnessing the power of technology and data, we can open new doors to this kind of financing— financing that is accessible, flexible and designed for the realities of African entrepreneurs.
With alternative credit assessments, we can redefine what it means to be creditworthy and evaluate businesses based on their performance and potential, rather than on traditional credit histories or collateral in a system where credit infrastructure is severely lacking. This shift can empower entrepreneurs to access the capital they need to progress, transforming their aspirations into tangible achievements.
At Advancly, we are committed to ensuring that entrepreneurs at every stage of growth have access to the capital they need to grow and scale. Leveraging data and technology, we are reimagining what creditworthiness can look like in a system where credit infrastructure is still developing. You can read more about our thoughts on creditworthiness here.
If you’re an entrepreneur looking to utilise credit to grow and scale, Advancly wants to partner with you to Power Progress for your business. Click the button below to begin your Progress Journey with us.