Lessons from India, Opportunities for Africa: Part 2 — From Global Dependence to Local Power: Building Africa’s Own Capital Markets

By Adrienne Henderson and Johan Bosini

This is Part 2 of our series exploring what Africa can learn from India’s digital transformation. In Part 1, we looked at how India’s bold investment in digital public infrastructure — Aadhaar, UPI, and Account Aggregator framework — unlocked a fintech boom. The takeaway? When public and private sectors collaborate on open, interoperable infrastructure, innovation flourishes.

But infrastructure alone doesn’t build ecosystems. Founders also need capital — and too often in Africa, that capital comes from far away.

So today we shift focus from infrastructure to investment — and ask:
Can Africa build a self-sustaining capital market like India has?

The Capital Paradox: Africa’s Fintech Growth vs. Foreign Funding Dependence

Africa’s fintech landscape is experiencing a remarkable surge. Innovations in challenger banking, digital lending, and embedded finance are transforming financial services across the continent. However, a significant paradox persists: while African fintechs address local challenges, they are predominantly financed by foreign capital.

~80% of venture capital (VC) funding in African fintech originates from outside the continent. This heavy reliance on external funding introduces several challenges:

1. Offshore Decision-Making

With the majority of capital coming from foreign investors, strategic decisions often align with external market expectations rather than local realities. This misalignment can lead to growth strategies that may not suit the unique dynamics of African markets.

2. Concentration of Capital

A limited number of foreign funds dominate the investment landscape, particularly in Series A and subsequent funding rounds. This concentration can stifle competition and limit the diversity of investment perspectives.

3. Amplified Risk During Global Downturns

Africa’s dependence on foreign capital makes its fintech sector vulnerable to global economic fluctuations. For instance, fintech funding in Africa fell by 37% from 2022 to 2023, a trend that continued into 2024, with funding in the first half of the year down by 51% compared to the same period in 2023. This decline was primarily driven by reduced equity funding from foreign investors.

Industry Perspectives:

• Ken Njoroge, Co-Founder of Cellulant, emphasized the need for localized solutions:
  “This historic investment will allow us to expedite the process of financial convergence in Africa, enabling us to offer simple mobile-based solutions on one platform to address the unique and dynamic needs of different customers across the continent.”
• Mercy Mutua, Investment Manager, highlighted the challenges of foreign-dominated funding:
  “The venture capital scene in Africa, especially beyond South Africa, remains underdeveloped, with significant funds originating from the US and Europe rather than local sources.”

To foster sustainable growth and ensure that fintech innovations are truly aligned with local needs, Africa must cultivate a robust internal funding ecosystem. This involves encouraging local institutional investors, such as pension funds and insurance companies, to participate actively in the fintech sector, thereby reducing over-reliance on foreign capital and enhancing economic resilience.

How India Built Its Own Capital Markets

India’s journey from a startup ecosystem reliant on foreign capital to one bolstered by robust domestic investment offers valuable lessons for emerging markets. Over the past decade, India has cultivated a self-sustaining investment environment through strategic initiatives and the active participation of local stakeholders.

Key Developments:

• Emergence of Domestic Limited Partners (LPs): Indian family offices, sovereign funds, and institutions like the Small Industries Development Bank of India (SIDBI) have become significant contributors to local venture capital (VC) funds. SIDBI’s Fund of Funds for Startups (FFS), launched in 2016 with a corpus of ₹10,000 crore (approximately $1.2 billion), has supported over 100 venture funds, indirectly investing in more than 1,000 startups.
• Growth of Angel Investment Networks: The rise of angel syndicates and platforms such as the Indian Angel Network (IAN), LetsVenture, and Mumbai Angels has democratized early-stage funding. These networks have expanded beyond metropolitan areas, reaching Tier 2 and Tier 3 cities, and have cultivated a broad base of early-stage investors.
• Access to Public Markets: Indian startups have increasingly turned to domestic public markets for capital. High-profile initial public offerings (IPOs) by companies like Zomato, Nykaa, Paytm, and PolicyBazaar have not only provided liquidity for investors but also validated the potential of Indian startups in the public domain.

Impact:

• Increased Domestic Investment: The proportion of domestic capital in Indian VC funds has grown, reducing dependence on foreign investors and aligning investment strategies more closely with local market dynamics.
• Resilience to Global Market Fluctuations: A robust domestic investor base has provided Indian startups with a buffer against global economic downturns, ensuring sustained funding and support during challenging times.
• Enhanced Ecosystem Maturity: The active participation of local investors has contributed to a more mature and self-reliant startup ecosystem, fostering innovation and long-term growth.

Industry Perspectives:

• Siddarth Pai, Founding Partner at 3one4 Capital, remarked:
  “India’s startup economy went from being venture-funded to venture-led — and now, venture-enabled. That final step came from local LPs, not foreign ones.”
• Padmaja Ruparel, Co-founder of IAN, highlighted the geographic expansion of investment activities:
  “We’re no longer just building startups in Bangalore — we’re seeing entrepreneurs and angels in cities that didn’t even have co-working spaces five years ago.”

India’s experience underscores the importance of cultivating local investment ecosystems to support and sustain startup growth. By engaging domestic investors and creating accessible funding avenues, India has laid a foundation for a resilient and dynamic entrepreneurial landscape.

What’s Holding Africa Back?

Africa has all the ingredients for a thriving startup ecosystem: world-class founders, massive addressable markets, and increasingly supportive regulators. So why does local capital still lag behind?

Despite the promise, most African startups remain overwhelmingly dependent on international venture funding. Here’s why that remains the case:

Limited Participation from Local LPs
African pension funds, insurance firms, and sovereign funds control over $500 billion in assets. Yet less than 1% of that capital flows into venture. Why? Many institutions are still cautious about the perceived risk and illiquidity of early-stage investing.

As Admassu Tadesse, CEO of Trade and Development Bank, noted:
“Mobilizing African institutional capital is not a question of availability — it’s about creating the vehicles and risk frameworks that make VC a credible allocation.”

Regulatory Inertia
In many countries, legacy rules limit where institutions can invest. VC is often classified under “alternative” or “speculative” assets, making it difficult for retirement funds or insurers to participate — even when returns are attractive.

📢 Razia Khan, Chief Economist at Standard Chartered, explains:
“Without regulatory reform to widen the investable universe for African institutions, large pools of capital will remain sidelined from the innovation economy.”

Shallow Exit Markets
Globally, VC thrives on exits — IPOs, acquisitions, and secondaries. But in Africa, these pathways are still nascent. Most exchanges lack the liquidity and analyst coverage to support tech listings, while the M&A market remains limited in scale and sophistication.

Still, there are green shoots. Regional exchanges like the Nairobi Securities Exchange are piloting SME boards, and secondaries platforms are beginning to emerge.

📢 Tomi Davies, President of the African Business Angel Network, said:
“Everyone talks about funding startups, but we also need to fund exits. Without liquidity, the system can’t recycle capital — and that’s the real bottleneck.”

If African fintech is to scale on its own terms, the continent must unlock its deep pools of domestic capital. That will require shifting how institutions think about risk, modernizing regulation, and building the exit infrastructure that allows early backers to reinvest.

The talent is here. The opportunity is massive. What’s missing is the capital flywheel.

What Will It Take?

Africa doesn’t need to replicate India’s playbook step for step. But there are clear lessons in how India built a self-sustaining capital market that backed its own innovation. For Africa, unlocking domestic capital will require bold moves across four fronts:

• Regulatory Reform for Pension Funds
  Africa’s institutional investors are sitting on deep capital — over $500B in pension assets alone. But outdated regulations often treat VC as too risky or illiquid to qualify. South Africa has started to shift this narrative: its amended Regulation 28 now allows pension funds to invest up to 15% in private equity and VC. Other markets could follow suit. Updating these frameworks could unleash billions in patient capital for high-growth sectors like fintech.

📢 As Tshepo Mahloele, founder of Harith General Partners, has said:
“We must redefine what is ‘risky’ — not investing in Africa’s growth story may be the greatest risk of all.”

• Support for Local Fund Managers
  Africa’s emerging VC ecosystem needs more locally rooted fund managers — especially those who deeply understand early-stage dynamics in fragmented, fast-moving markets. Development finance institutions (DFIs), foundations, and corporate anchors can play a catalytic role by seeding first-time funds led by African GPs. Doing so creates more than financial upside — it strengthens ecosystems and keeps decision-making closer to the ground.

📢 As Maya Horgan Famodu of Ingressive Capital puts it:
“Local capital isn’t just about money — it’s about people who live the problems and are betting on the same future.”

• Scalable Angel Infrastructure
  The rise of angel platforms like Future Africa, Daba, Nairobi Angel Network, and Lagos Angels Network is expanding early access to capital across the continent. But these networks remain fragmented, under-capitalized, and often disconnected from follow-on funding. To scale, they need better tools, co-investment platforms, and clear liquidity pathways so capital can recycle and returns can compound.
• 📢 Iyinoluwa Aboyeji, Co-founder of Future Africa, notes:
  “Angels are the bridge between idea and institution. We need to build the bridges stronger — and make sure they don’t disappear after the first check.”
• Deeper and More Integrated Exit Markets
  Without credible exit routes, capital gets stuck — and the flywheel of reinvestment stalls. Africa’s public markets have underperformed as destinations for tech IPOs, but the potential is real. Regional efforts to revive and integrate exchanges like the BRVM, Nairobi Securities Exchange, and JSE, as well as developing private secondaries, could provide the visibility and liquidity startups need to scale sustainably.
• 📢 As Andreata Muforo of TLcom Capital said at the 2024 AVCA Summit:
  “We don’t just need capital in — we need capital to flow through. That means exits. That means liquidity. That means mature markets.”

It’s Already Starting

Africa doesn’t need to start from scratch. Across the continent, local capital is quietly but steadily gaining ground — fueled by visionary general partners, diaspora angels, institutional anchors, and a few long-awaited liquidity moments.

🔹 In Egypt, funds like Sawari Ventures and Algebra Ventures are demonstrating how local banks, sovereign funds, and DFIs can jointly back early-stage innovation. Their portfolios span healthtech, logistics, and fintech, with follow-on funding coming from global investors — a validation of local selection.

🔹 In Nigeria, fund managers like TLcom Capital, Oui Capital, and Chapel Hill Denham are cultivating domestic LP bases. Oui Capital recently exited its investment in Moniepoint, while TLcom has backed fintech leaders like Okra and Autochek, with growing backing from Nigerian family offices and pension-linked pools.

🔹 In South Africa, Knife Capital, 4Di Capital, and Norrsken22 are blending local and international capital, backing companies with global potential. The JSE’s renewed focus on innovation-friendly listing vehicles — including proposed dual-class shares and tech sector boards — may unlock better exit routes for growth-stage ventures.

📈 And perhaps most notably, local exits are starting to materialize.

Take LemFi, the Nigerian remittances startup. In January 2025, LemFi closed a $53 million Series B round — and in the process, quietly delivered one of the highest-multiple exits in recent African VC history. Early backer Silverbacks Holdings, a Pan-African private equity firm, fully exited its stake and achieved a 29x return on capital.

“This 8th profitable exit, which delivered 29x cash invested, is another testament to the quality of our portfolio’s founders and the investment sophistication of the Silverbacks ecosystem.”
— Ibrahim Sagna, Executive Chairman, Silverbacks Holdings

Silverbacks’ approach — diversified across fintech, media, sports, and creative industries — has allowed it to back both household names (like Flutterwave and Moove) and emerging ventures like African Warriors Fighting Championship. It also reflects a critical reality: Africa’s biggest exits may not come just from Silicon Valley-style unicorns, but from culturally grounded, commercially viable ventures across multiple sectors.

This is more than a feel-good story. It’s a signal that:

• African GPs can deliver world-class returns
• There is a viable pipeline for exits, even in difficult macro climates
• Local LPs have a chance to own more of the upside when they show up early

As private capital exits across Africa decline (43 in 2023, down from 82 in 2022, with just 31 tracked by Q3 2024), LemFi’s $53M round stands out as proof that local capital, when deployed thoughtfully, can yield outsized results.

The Bottom Line

If Africa wants to fund innovation on its own terms, it must build the financial engines to match. That means empowering local investors, creating local exits, and giving founders a true choice in how they build.

India’s example shows that it’s possible. Now Africa must write its own version.

💬 What examples have you seen of local capital building up Africa’s tech ecosystem? Let us know — or reach out to collaborate.