One of the challenges in Uganda is that entrepreneurs cannot access cheap capital. Banks and bank loans, are the most available sources of capital and these are lending at more than 20%. That means that at a bare minimum, a business should be registering an operating profit margin of more than 20% for it to be able to pay back such a loan.
Yet, most breakthrough and high impact ideas can’t be realized in a year or two or even five. These ideas need patient capital. One of the ways is to get the Uganda Government out of the local financing market. Currently, Ugandan ideas compete with the government for the same capital. Banks would rather lend to the government than to the local entrepreneur.
At Africa Nxt Gen Foundation, we are also proposing new forms of capital for Uganda. One of those is local mezzanine debt. We must be able to structure local solutions to the problems of capital in the country. Take for example Local Private Equity. Can we get the top businessmen in this country to back potential ideas of their younger counterparts?
In 2024, we are putting together working teams to research on the viability of new forms of capital for the Ugandan market.
Uganda Needs Patient Capital
One of the challenges in Uganda is that entrepreneurs cannot access cheap capital. Banks and bank loans, are the most available sources of capital and these are lending at more than 20%. That means that at a bare minimum, a business should be registering an operating profit margin of more than 20% for it to be able to pay back such a loan.
Yet, most breakthrough and high impact ideas can’t be realized in a year or two or even five. These ideas need patient capital. One of the ways is to get the Uganda Government out of the local financing market. Currently, Ugandan ideas compete with the government for the same capital. Banks would rather lend to the government than to the local entrepreneur.
At Africa Nxt Gen Foundation, we are also proposing new forms of capital for Uganda. One of those is local mezzanine debt. We must be able to structure local solutions to the problems of capital in the country. Take for example Local Private Equity. Can we get the top businessmen in this country to back potential ideas of their younger counterparts?
In 2024, we are putting together working teams to research on the viability of new forms of capital for the Ugandan market.
Photo Credit: https://www.semanticscholar.org/paper/Patient-capital-in-entrepreneurial-finance%3A-a-of-of-Harrison-Botelho/1efbfebc6a1b47d73a582dac82c87d6db657f8b4/figure/0
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