African tech startups raised $1.64 billion through debt financing in 2025, a 63% jump from $1.01 billion in 2024 and the highest level ever recorded on the continent. The number of debt transactions also hit a record: 108 deals, up 40% from 77 in 2024. Debt now accounts for 41% of all capital deployed in African tech, up from just 17% in 2019.
The article celebrates this as maturity. Partech’s Tidjane Dème says it’s “a sign that African startups are getting more mature and predictable.” But here’s what nobody’s asking: If debt is growing 63% while equity investors are pulling back (539 unique equity investors, down 7% from previous year), is this maturity or is this what happens when equity becomes harder to access?
The Numbers:
The debt surge: — $1.64B debt financing in 2025 (vs $1.01B in 2024 = +63%) — 108 debt deals in 2025 (vs 77 in 2024 = +40%) — Debt as % of total African tech capital: 41% in 2025 (vs 17% in 2019) — Average debt ticket size: ~$15.3M (consistent with prior years)
Geographic breakdown: — Kenya: $498M (30% of all African debt) — Egypt: $246M (+73% YoY) — Nigeria: $160M (+132% YoY) — Senegal: $139M (driven by Wave’s $137M deal)
Sector breakdown: — Fintech: $716M (44% of all debt) — Cleantech: $627M (only sector where debt > equity) — Fintech + Cleantech = 82% of all debt
Investor landscape: — 77 unique debt investors (+10% from 2024) — 57% were debt-only players (up from 48-49% in 2022-2023) — Active debt investors: British International Investment, IFC, Lendable, Proparco, Verdant Capital — Commercial banks entering: Rand Merchant Bank (Wave deal), others in Egypt
The equity picture (conflicting data): — Partech says: Total equity $2.4B (+8% YoY), but investor count down to 539 (-7%) — The Next Africa says: Equity shrank in absolute terms, debt filled the gap — Seed equity: Deal count -1%, capital -4%
Key deals: — Wave (Senegal fintech): $137M debt led by Rand Merchant Bank — M-Kopa (Kenya): Structured debt-equity raise — Sun King: Solar securitization — Nawy (Egypt): Bank financing
Comparison – How African Startup Financing Evolved:
2015-2019: The equity-only era African startups raised almost exclusively equity because: — No track record = no predictable cash flows = no lenders willing to deploy — Venture debt barely existed in Africa — Even growth-stage companies had to dilute for expansion capital — Debt was for “real businesses,” not tech startups
2020-2022: Early debt experiments — First venture debt funds started deploying to African startups — Development finance institutions (IFC, Proparco) began structured debt deals — But still <25% of total capital was debt — Mostly asset-backed lending (solar panels, motorcycles, vehicles)
2023-2024: Debt becomes mainstream — $1.01B debt in 2024 — More dedicated debt-only investors — Commercial banks starting to write tech debt tickets — But still concentrated in fintech + cleantech
2025: The inflection point — $1.64B debt (+63%) — 41% of all capital is now debt — 57% of debt investors are debt-only (not equity funds doing side bets) — Commercial banks actively participating
What changed: A cohort of African startups has now operated 5-10+ years with sufficient scale to demonstrate bankable cash flows. Wave (mobile money), M-Kopa (solar financing), various fintechs have predictable revenue streams that make debt possible.
Comparison to other emerging markets:
India (more mature ecosystem): — Debt accounts for 50-60% of startup capital at growth stage — Venture debt funds well-established (Trifecta, Alteria, InnoVen) — Banks routinely lend to tech companies with 2-3 years of revenues — African tech at 41% debt = approaching India’s maturity level
Latin America: — Debt ~35-40% of total startup capital — Strong venture debt market — More commercial bank participation than Africa — Africa catching up
Southeast Asia: — Debt ~30-35% of capital — Less developed than India, more than Africa was 3 years ago — Africa leapfrogged Southeast Asia in debt % in 2025
The concerning comparison – what’s NOT being said:
While debt grew 63%, equity investor count dropped 7%. That’s not a sign of maturity, that’s a sign of investor pullback being masked by debt growth.
If average African equity deal is $3M, and The Next Africa is right that equity shrank in absolute terms (let’s say by $700M based on their reporting vs Partech’s), that’s 233 fewer equity-funded startups. Where did they go?
Business Model Reality – What Debt Actually Means for Startups:
Why debt makes sense for growth-stage companies:
Using Wave as example: $137M debt from Rand Merchant Bank.
Wave has: — Millions of mobile money users — Predictable transaction revenues every month — Steady cash flows — Proven unit economics
Wave can either: — Raise $137M equity at $1B+ valuation, dilute founders/investors by 12-15% — Raise $137M debt at 8-12% interest, pay back over 5 years, keep ownership
Debt is smarter IF: — Revenue growth continues (can service payments) — Margins hold (interest payments don’t kill profitability) — No major regulatory/market disruption
The unit economics of debt vs equity:
Example: $10M capital need for expansion
Equity route: — Give up 15% of company at $67M valuation — If company exits at $200M, that 15% = $30M to investors — Founders/existing investors lost $30M of upside — Cost of capital: Effectively $20M ($30M exit value – $10M raised)
Debt route: — Borrow $10M at 10% interest over 5 years — Total repayment: $12-13M (depending on structure) — If company exits at $200M, founders/investors keep all $200M minus $13M debt service — Cost of capital: $2-3M in interest — Savings vs equity: $17M+
This math explains why growth-stage companies with cash flow choose debt. But it only works if revenues keep growing.
The sectors where debt works vs doesn’t work:
Where debt works (82% of debt goes here):
Fintech ($716M debt): — Lending companies: Have loan portfolios generating interest income — Payment processors: Transaction fees = predictable revenue — Example: If fintech lends $50M at 20% interest, generates $10M/year revenue. Can borrow $20M at 10% interest, pay $2M/year, net $8M. Math works.
Cleantech ($627M debt): — Solar companies: Monthly payments from customers buying panels on credit — Electric mobility: Rental/subscription revenues from motorcycle/vehicle fleets — Asset-backed: Can seize solar panels or vehicles if customer defaults — Example: Sun King finances solar panels to 1M households at $10/month = $10M monthly revenue = $120M annually. Can support $100M+ debt facility.
Where debt DOESN’T work (<20% of debt):
— SaaS companies: Revenue often unpredictable, customer churn high — E-commerce: Thin margins, high cash burn, inventory risk — Marketplaces: Takes years to reach sustainable unit economics — Early-stage anything: No revenue, no debt
The problem: Seed funding is dying
Article mentions seed equity down 4% in capital, down 1% in deal count. That’s the real crisis being buried under “debt = maturity” narrative.
Debt only works for companies that have: — 2-3+ years of operations — $1M+ annual revenue — Predictable cash flows — Proven unit economics
That means seed-stage, pre-revenue, early traction companies STILL need equity. And equity is shrinking: — 539 equity investors in 2025 (down 7%) — Seed capital down 4% — Fewer investors writing $500K-$2M checks
If seed funding continues declining, the pipeline of companies that can eventually access debt in 3-5 years will dry up.
Risk – Why This Could Fail:
The debt service trap:
Debt must be repaid regardless of performance. Equity gives you flexibility – if you have a bad year, investors wait. Debt doesn’t wait.
Example scenario: Fintech raises $20M debt at 12% interest = $2.4M annual payments. — If revenue drops 30% due to regulatory change (Kenya’s interest rate cap in 2016 killed many lenders) — Still owe $2.4M annually — Can’t pay → Default → Liquidation
In 2026-2027, if African economies hit recession (Nigeria, Kenya, Egypt all facing inflation, currency pressure), many debt-funded startups could default simultaneously.
The concentration risk – Kenya = 30% of debt:
$498M of $1.64B = Kenya. If Kenya’s startup ecosystem hits a crisis: — Regulatory crackdown (CBK has history of sudden fintech restrictions) — Economic downturn (shilling devaluation, inflation) — Political instability — Debt market could shrink 30% overnight
The sector concentration risk – Fintech + Cleantech = 82%:
If either sector hits headwinds: — Fintech regulation (interest caps, consumer protection laws) — Clean energy: Subsidy changes, competition from grid improvements — Default rates spike → Lenders pull back → Debt market freezes
This happened in India 2019-2020: IL&FS crisis → NBFC lending freeze → Venture debt dried up for 18 months.
The “false maturity” risk:
Debt growth could be masking equity market weakness, not supplementing it. If equity is actually declining (The Next Africa’s view) while debt grows, that means: — Investors don’t believe in high valuations anymore — Startups taking debt because they CAN’T raise equity at acceptable terms — Debt becomes last resort, not smart choice
When debt becomes last resort rather than strategic choice, companies over-leverage and defaults rise.
The repayment wall risk – 2028-2030:
Most debt raised 2024-2025 has 3-5 year terms. That means: — 2027-2028: First wave of repayments come due — 2028-2030: Peak repayment period
If startups can’t refinance (raise new debt to pay off old debt), or can’t generate enough cash to service debt, mass defaults possible.
Prediction – How To Track If This Works:
By June 2026 (6 months): — If debt raises hit $1B in H1 2026 (maintaining pace), trend continues — If debt <$600M in H1 2026, 2025 was peak — Watch for first high-profile debt default – will spook lenders — Track seed funding: If down another 10%+, pipeline crisis confirmed
By December 2026 (12 months): — If debt hits $2B+ for full year 2026, growth accelerating — If debt $1.4-1.6B, plateau — If debt <$1.4B, pullback beginning — Watch commercial bank participation: If 5+ major African banks actively lending to tech, mainstream. If still mostly DFIs/specialized funds, niche. — Track defaults: If <2% of debt-funded companies default, sustainable. If 5%+, quality concerns.
By December 2027 (24 months): — Success scenario: Debt $2.5B+, equity rebounds to $3B+, seed funding growing again, debt spread across 6+ sectors, <3% default rate, 10+ commercial banks active — Partial success: Debt $2B, equity stable $2.4B, seed still weak, debt still 80%+ in fintech/cleantech, 3-5% defaults — Failure: Debt <$1.5B (declined from 2025 peak), equity <$2B, seed down 20%+ from 2025, multiple defaults, lenders pulling back, commercial banks exiting
Key metrics to watch:
- Debt-to-equity ratio: If debt exceeds equity (>50% of capital), ecosystem overlevered
- Seed funding absolute dollars: Needs to stabilize at $200M+/year minimum
- Debt default rate: <5% = healthy, 5-10% = concerning, >10% = crisis
- Sector diversification: Debt needs to spread beyond fintech/cleantech to healthtech, logistics, B2B SaaS
- Geographic diversification: Kenya can’t be 30% of debt forever – need growth in Nigeria, Egypt, South Africa, West Africa
- Commercial bank participation: Need 10+ banks writing $10M+ tech debt tickets by 2027
The question nobody’s asking:
Article frames this as “startups are maturing and becoming bankable.” But ask: Why did equity investor count drop 7%?
Possible answers:
- Optimistic: Investors shifting from equity to debt because returns better + less risky
- Neutral: Natural market evolution, some investors exit, others enter
- Pessimistic: Equity investors lost money 2021-2022, exiting African tech, debt filling gap created by equity pullback
If #3 is true, debt growth is symptom of equity crisis, not sign of maturity.
Honest assessment:
$1.6B debt with 108 deals = $15M average ticket = mostly growth-stage companies with proven models.
This is genuinely good for the 100-150 African startups mature enough to access debt. They can grow without dilution, extend runway, scale faster.
But it’s genuinely bad if: — Seed funding keeps declining (down 4% and falling) — Equity investor base keeps shrinking (539 investors, down 7%) — Early-stage companies can’t get funded — Pipeline for future debt-eligible companies dries up
The real test: Can African tech support BOTH a healthy debt market ($2B+/year) AND a healthy equity market ($3B+/year) with strong seed funding ($300M+/year)?
If yes, 2025 was inflection point toward mature ecosystem.
If no, 2025 was the year debt masked an equity market in retreat, and we’ll see the consequences in 2027-2028 when repayments come due and the seed-stage pipeline has dried up.
Benchmark to watch: India’s ecosystem has $15B+ equity + $8B+ debt annually = healthy mix. African tech at $2.4B equity + $1.6B debt = $4B total. Needs to reach $10B+ total by 2030 with balanced split (60% equity, 40% debt) to prove maturity thesis. If 2030 shows $6B total with 50%+ debt, it means debt substituted for equity that never came, not supplemented it.
