Financing Limits Sub-Saharan African Entrepreneurship – Research | Independent Newspapers Limited
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Financing Limits Sub-Saharan African Entrepreneurship – Research

Posted: Sep 30, 2015 at 12:05 am   /   by   /   comments (0)

Stories by Sola Alabadan,


Financing is a significant factor limiting sub-Saharan African entrepreneurship, a new research from the U.K-based Global Entrepreneurship Monitor (GEM), has indicated. Herrington serves as GEM‘s executive director.

The GEM African Youth Report studied the circumstances, behaviours and attitudes of 20,000 young entrepreneurs age 18 to 34 over three years in Nigeria, Angola, Botswana, Ghana, Malawi, Namibia, South Africa, Uganda and Zambia.

Without credit history to satisfy bank regulations, the vast majority of African youth entrepreneurs uses their own funds or gets help from family. Men generally have more access to banks than women, but even so, the numbers are low.

When it comes to financing, Angola performed best out of nine countries surveyed in the GEM report — 35.6 percent of young men reported that they used official financing. By comparison, Malawi reported the lowest use of financing with just 1 percent of men using banks or other institutions to finance their venture.

Results show that there is ambition, desire to succeed and no fear of hard work among African youth. What is missing, however, is government support, or the awareness of existing government support, and infrastructure to grow these businesses.

Uganda has the highest regional rate of entrepreneurial activity, with 56 percent of youth involved in starting or running their own business, but 63.8 percent of these businesses do not create more than one job (for the owner) and just 34 percent create between one to five jobs.

This is partly because many businesses are selling undifferentiated products and services in over-traded markets, making it difficult to generate a profit or lead to viable business creativity over the longer term.

In the GEM study, 68 percent of entrepreneurs polled said their product or service was not new to some or all of their customers. Hospitality and retail sectors account for 64 percent of youth businesses in sub-Saharan Africa.

One surprising finding of this new research is that many government initiatives exist for entrepreneurs, but most entrepreneurs are unaware of them.

Governments must do a better job of getting information out in the public about these programs, and of targeting existing and potential young entrepreneurs, Herrington said.