Companies seeking capital are preferring private debt from non-bank investment vehicles compared to bank loans and equity investment by private equity and venture capital funds, attracted by more flexible lending terms.
Analysis by the African Private Capital Association shows that in 2025, private debt deals rose by 57 percent to 72 transactions on the continent, outpacing the growth of two percent for PE and venture capital deals.
David Owino, managing partner at Ascent Capital Advisors, told the Business Daily that while banks may offer businesses cheaper money, they are more rigid when it comes to repayment, even in times of heightened geopolitical risk that affects cash flow.
Private lenders, on the other hand, are able to work with an entrepreneur or company to ride out such shocks, through solutions such as restructuring or deferral of repayments, and conversion of debt to equity.
This shift also indicates that private debt is increasingly filling gaps left by constrained bank lending and more selective venture capital deployment in the region due to higher risk facing startups and growth phase companies amid a tough global economic environment.
‘When you go borrow money from a bank, you’ll be asked for land or other assets as collateral. Private debt comes and looks at cash flows of the business, and they are flexible enough to work with businesses in times of crisis and in terms of success,’ said Mr Owino, who is also the chairman of the East Africa Venture Capital Association.
‘Inflexibility of bank credit has encouraged private debt to come through.’
He added that from an investor’s perspective, private debt is increasingly preferred to equity due to risk considerations.
In equity investments, the PE or VC investors share in the risk of the business, hoping that the business would grow enough to allow them to make their money at the end of the length of the investment.
‘Whereas debt means that, in as much as I’m not chasing you like a bank, every so often I’m seeing cash coming back. That element of being able to liquidate the instrument and get money back to investors is what has made it now actually look more attractive as compared to traditional private equity,’ said Mr Owino.
In 2025, Africa reported $5.1 billion (Sh659.4 billion) in private capital deals, down from $5.4 billion (Sh698.2 billion) in 2024.
East Africa recorded the strongest growth on the continent with investment value going up by 75 percent year on year to $1.2 billion (Sh155.2 billion), positioning the region as Africa’s second-largest market by value behind Southern Africa’s $1.6 billion (Sh206.9 billion).
In terms of sectors, the financial sector retained its position as the largest recipient of capital, while ICT emerged as the fastest growing sector. By contrast, a decline was recorded on the fast moving consumer goods, retail and agro-processing sectors, according to AVCA.
In the venture capital segment, Kenya reported deals worth $1.09 billion (Sh141 billion), placing it ahead of other large African economies such as South Africa (Sh68 billion), Egypt (Sh78 billion) and Nigeria (Sh37 billion).
Four companies accounted for 70 percent of Kenya’s venture capital inflows in 2025, led by off-grid solar firm D.Light in form of Sh39 billion debt from French VC fund Mirova, and fellow solar firm Sun King at Sh35 billion in debt and equity from the International Finance Corporation (IFC) and London-based VC Lightrock.
Electric motorcycle manufacturer Spiro raised Sh12.9 billion to expand production, with the fundraising led by the Fund for Export Development in Africa (FEDA), the development arm of Afreximbank.
Clean cooking startup Burn Manufacturing raised Sh11.6 billion, mostly in debt from the Trade and Development Bank (TDB).