Grace Ashiru
The (TSA) has signed a three-year partnership agreement with Africapital Investment Holding Limited to expand financing opportunities for local startups struggling to access conventional bank loans. The agreement was formalized on Friday through a Memorandum of Understanding in Dar es Salaam, marking a significant step toward addressing the funding gap facing Tanzania’s emerging technology sector.
Addressing the Traditional Banking Challenge
The partnership specifically targets startups that face barriers when seeking financing through conventional banking channels. Traditional financial institutions often require collateral, established credit histories, and proven revenue streams that many early-stage technology companies cannot provide, creating a significant financing gap in Tanzania’s startup ecosystem.
This challenge is particularly acute in East Africa, where banks typically focus on established businesses with tangible assets rather than technology ventures with intellectual property and scalable digital business models. Recent data shows that in 2025, Tanzania startups have raised only $1.7 million across 2 equity funding rounds through March, compared to $12.9 million across 5 rounds in the same period the previous year, highlighting the pressing need for alternative financing mechanisms.
Strategic Partnership Framework
The three-year collaboration between TSA and Africapital Investment Holding Limited is designed to create structured pathways for startup financing outside traditional banking systems. The Tanzania Startup Association functions as an umbrella membership-based organization that brings together stakeholders of the startup ecosystem in Tanzania to drive agendas that ensure ecosystem growth, making it well-positioned to facilitate this financing initiative.
Africapital Investment Holding Limited brings investment expertise and capital access that complements TSA’s ecosystem knowledge and startup network, creating a partnership that addresses both the supply and demand sides of the alternative financing market.
Broader Ecosystem Context
This partnership comes at a time when Tanzania’s government is implementing supportive policies for the startup sector. The launch of the Sh100 Billion Tanzania Venture Capital Fund, set to be operational by June 2025, will target high-potential startups and SMEs in sectors like agritech, fintech, clean energy, healthcare, and manufacturing, demonstrating coordinated efforts to strengthen the entrepreneurial ecosystem.
Additionally, programs like FUNGUO and iMBEJU are offering equity-free grants and soft loans ranging from TZS 50 million to TZS 100 million, specifically targeting innovative startups with proven market traction, indicating a growing recognition of the need for diverse financing options.
Alternative Financing Models
The partnership is expected to introduce various alternative financing instruments that better suit startup needs, including revenue-based financing, convertible debt, and asset-light lending models. These approaches can provide capital without the stringent collateral requirements of traditional banking while offering more flexible repayment terms aligned with startup cash flow patterns.
Such financing models have proven successful in other African markets, where startups have utilized revenue-based financing to scale operations while maintaining equity control and avoiding the dilution associated with traditional venture capital rounds.
Impact on Tanzania’s Tech Ecosystem
The collaboration addresses a critical infrastructure gap in Tanzania’s startup ecosystem, where promising ventures often struggle to bridge the gap between initial development and sustainable growth. By providing alternative financing pathways, the partnership can help startups achieve scale without premature equity dilution or excessive debt burdens.
This initiative also positions Tanzania competitively within the East African startup landscape, where neighboring countries like Kenya and Rwanda have developed more mature alternative financing ecosystems. The partnership could help Tanzania attract and retain entrepreneurial talent while encouraging local innovation in key economic sectors.
The formalization of this agreement represents a significant milestone in Tanzania’s efforts to build a comprehensive startup support infrastructure that addresses the full spectrum of entrepreneurial needs, from initial incubation through scaling and growth phases.
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