African startups increased their use of debt financing in 2025, even as venture capital equity funding slowed.
According to a report by the African Private Capital Association (AVCA), startups raised $1.8 billion through debt last year, a 91 percent jump from 2024.
Debt financing made up 46 percent of the total $3.9 billion secured by African startups in 2025.
At the same time, equity funding dropped, with startups attracting $2.1 billion in equity investments, a 21 percent decline from the previous year.
Nadia Coulibaly, AVCA’s head of research, said the shift toward debt mirrors a wholesome global trend.
According to Nadia, tighter equity market conditions have made investors more cautious, prompting startups to seek alternative funding sources. Equity financing has become more expensive, and investors are taking fewer risks.
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“We do think it is a trend that will stay in the market, as we see in the global market,” Nadia Coulibaly, head of research at AVCA said in an interview, referring to the increase in credit. “It reflects tighter equity condition for startups. Equity costs a lot; investors are cautious.”
Equity funding in Africa had grown rapidly up to 2022.
However, rising inflation, higher interest rates, and global economic uncertainty caused many investors, especially international ones, to scale back their commitments. This slowdown has opened the door for more local financiers and debt providers to step in.
Development financial institutions (DFIs) based in Africa played a larger role in 2025, accounting for 63 percent of total startup funding, reversing the 2022–2024 period when international DFIs provided 94 percent of commitments.
African investors also deepened their pockets, contributing 45 percent of total funding in 2025, up from an average of 23 percent in the previous three years.
Although debt financing is growing, much of it is concentrated in a few large deals. Six major transactions, including funding rounds for Kenya’s Sun King and Senegal’s Wave, accounted for $1.1 billion, or 60 percent, of total debt raised.
Nadia said debt is increasingly becoming a key pillar of Africa’s venture capital environment.
She described it as a sign of a more mature startup ecosystem, one that is beginning to use a wider range of financial instruments beyond traditional equity.
