Even as VC financing drying up around the world, development finance institutions (DFIs) are looking to African startups to deploy their dry powder.
British International Investment (BII), a UK-based DFI, recently told ukbusinessupdates.com that it will commit $500 million to startups by the end of 2026, and half of that amount will go to African tech companies. In addition to supporting VC funds in the region, the organization is seeking more direct equity investment in startups, in addition to the four African companies it invested in last year.
The BII, formerly known as the Commonwealth Development Corporation, is not alone: The World Bank’s International Finance Corporation (IFC) and the Dutch Nederlandse Ondernemersbank (FMO) have each invested in more than 10 startups over the past four years. The IFC also recently launched a $225 million fund to support early stage startups in Africa, Central Asia, the Middle East and Pakistan.
Often linked to countries that had colonized large parts of the continent and still have financial, social and historical ties to countries in the region, these funding initiatives complement and offset the slowing investments of venture capital funds and other institutional investors.
“It’s a paradigm shift, where ‘development finance’ sees private enterprise as a vehicle for socio-economic development,” said Dario Giuliani, founder and director of research firm Briter Bridges.
BII’s decision follows plans to double its efforts and invest some $6 billion in Africa over five years $100 million in Egyptian startups. The organization has invested in eight African startups since 2020.
But what drives these organizations to invest in Africa despite investors around the world preferring to invest only in safer bets? It seems they are drawn to technology that enables broader socio-economic development as it provides a scalable and efficient way to make an economic impact.
Investing in technology to achieve development goals
DFIs commonly use capital from national or international development funds and support development and private projects in less industrialized economies to promote job creation and sustainable economic growth. These organizations are eager to join those missions and seek to support tech startups that can make an impact – for example, technology that empowers marginalized populations and increases access to financial services, food and energy.
