The Tanzania Startup Association (TSA) has signed a three-year Memorandum of Understanding with Africapital Investment Holding Limited to widen access to non-bank financing for local startups. The agreement, formalized in Dar es Salaam, targets young companies that struggle to meet traditional lenders’ collateral and track-record requirements. It marks a coordinated attempt to unlock capital for Tanzania’s emerging technology ventures while building a more flexible funding pipeline.
Addressing banking constraints
Early-stage startups in Tanzania often face stringent collateral, credit history, and revenue thresholds that effectively shut them out of commercial credit. The problem is common across East Africa, where banks tend to prioritize asset-heavy firms over software-driven or IP-based models. Funding data reflect the strain, with startups in Tanzania raising only 1.7 million dollars across two equity rounds through March 2025 compared with 12.9 million dollars across five rounds in the same period a year earlier.
Partnership scope and roles
Under the MoU, TSA will leverage its membership base and policy advocacy to surface investment-ready companies and reduce friction for founders. Africapital will contribute investment expertise, capital access, and transaction support, aligning capital supply with real startup demand. The three-year horizon is designed to institutionalize processes, standardize diligence, and create repeatable pathways for non-bank financing.
Incubation and founder enablement
Alongside financing pathways, TSA and Africapital plan a three-year incubation program to mentor, fund, and accelerate high-potential startups and SMEs. The program will open with a public launch and call for applications, followed by joint screening and final selection of cohorts. Selected companies will enter a structured incubation journey culminating in a demo day with Africapital’s investor network and receive alumni support through TSA’s ecosystem.
Instruments tailored to startup cash flows
The collaboration is expected to deploy instruments that fit venture cash-flow dynamics rather than balance-sheet collateral. Revenue-based financing can align repayments with monthly performance, while convertible debt provides flexibility on valuation and timing of equity conversion. Asset-light lending models can further bridge working-capital gaps without imposing heavy security requirements that young companies cannot provide.
Policy tailwinds and public programs
The partnership lands amid growing government support for entrepreneurial finance in Tanzania. The planned Sh100 billion Tanzania Venture Capital Fund, slated to be operational by June 2025, aims to back high-potential startups and SMEs in sectors including agritech, fintech, clean energy, healthcare, and manufacturing. Complementary initiatives such as FUNGUO and iMBEJU are extending equity-free grants and soft loans of 50 to 100 million Tanzanian shillings to innovation-driven ventures with market traction.
Competitive positioning in East Africa
By tackling the financing bottleneck, Tanzania seeks to close the gap with regional peers that already host more mature alternative capital markets. A clearer pipeline from incubation to flexible capital can help retain entrepreneurial talent and attract regional investors looking for diversified exposure. If executed effectively, the framework can reduce premature equity dilution, lower debt burdens, and improve survival rates through the scale-up phase.
Execution roadmap and engagement
Following the formalization, TSA will use its advocacy and data insights to inform startup policy while channeling founders into the new programs. Applications will open after the official launch, with rolling evaluation and cohort onboarding to keep momentum and reduce wait times. Stakeholder engagement will build around Tanzania Startup Week 2025 and the broader Vision 2050 narrative to align founders, investors, and policymakers on outcomes.
The TSA–Africapital agreement creates a structured bridge between Tanzania’s founders and flexible, non-bank capital at a time when equity flows have slowed. By pairing incubation with alternative financing instruments, the partnership targets the most persistent barriers to growth in the local venture market. Its success will be measured by the quality of startups funded, the velocity of capital deployed, and the durability of a financing architecture that can outlast the current cycle.