Banks just don’t want to finance start-ups

Tuesday September 3 2019

Mr Richard Zulu, founder and managing director

Mr Richard Zulu, founder and managing director at Outbox, an innovation hub and co-working space in Kampala, engages an entrepreneur on their startup. PHOTO BY ERONIE KAMUKAMA 

By Christine Kasemiire

Kampala Innovation week has been sold as a visit to the therapist for many tech startups. Aimed at addressing challenges in Uganda’s nascent technology world, the event rounds up players in the tech eco system in the city.

While conversations around the globe centred on technology, Uganda lay idle. It was soon after that the technology startups woke up. The idea bore the pioneer innovation week.

“Initially, there was nothing happening in Kampala. So year one was really about bringing Uganda especially Kampala to celebrate the entrepreneurs they have. It was a year of awareness and attracting partners who could take the potential of entrepreneurs to the next level,” Mr Japheth Kawanguzi, team leader Innovation Village said.

The second year hovered around driving up investment to entrepreneurs, to a country painted as the most entrepreneurial.

The 2019 edition is a three-day event slated for October 16 to 18 with invites to angel and venture capital investors, a dissection of the missing pieces in Uganda’s eco system among others.

Conversations world over in regards to start ups centre on investment, policy and profitability among others.

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Funding

In technology and innovation, it is hard to say where the ground on financing lies.
Commercial banks just don’t want to fund startups because of their risky nature of business alongside long-term expectation of profitability.

Subsequently, startups such as Jumia at the beginning of the year, listed on the London stock exchange to acquire patient capital.

According to 2018 research conducted by Partech Partners, 146 African tech startups raised a total of $1.63b (Shs4.7 trillion) in equity increasing venture capital funding from $560m (Shs2 trillion) in 2017.

However, Kenya, Nigeria, South Africa took the lion’s share, garnering 78 per cent of the total funding while Uganda lags behind with only $1m (Shs3.6b).

Government has also taken interest in innovation. The ministry of Information Communications and Technology (ICT) rolled out the National ICT initiative support programme which is a heavy investment project in tech startups.

Among the beneficiaries of more than Shs2b awarded in the project’s pilot year was Xente, an online payment solution.

In April, Minister of ICT, Frank Tumwebaze lobbied for an increase in innovation fund from Shs13b to Shs30b, saying 600 applications had been received from startups.

Municipal centres

Mr Maxwell Otim, director science, research and innovation at Ministry of Science, Technology and Innovation revealed that government has plans to construct municipal centres.

The municipal centres which will aim at including people outside Kampala will also allow them acquaint themselves with using internet services.
Mr Otim expects the move to increase innovation in the country especially the outskirts of the city.

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