Click to watchAcross Africa, the majority of startups operate as informally small, unregistered businesses driven by digital platforms rather than office spaces or financial systems. From Lagos to Nairobi, millions of entrepreneurs sell goods and services via Instagram, WhatsApp, or mobile money, often without formal accounting or business documentation. These are the real faces of African enterprise: agile, creative, and digital, yet invisible primarily to banks and investors.
According to the International Labour Organisation, around 85% of Africa’s workforce is employed in the informal economy, which contributes more than 60% of the continent’s total GDP. Despite this economic weight, access to finance remains a significant obstacle. Reports indicate that fewer than half of African startups survive beyond three years, primarily due to a lack of funding and poor record-keeping. For these businesses, Artificial Intelligence (AI) offers practical tools to improve credibility, transparency, and access to finance.
The funding challenge for African startups
1. Poor financial records
Most small businesses do not keep structured records of their income and expenses. Without transparent ledgers or statements, it becomes difficult to convince banks or investors of profitability. This lack of documentation discourages lenders, who see the businesses as risky. Weak bookkeeping remains a leading cause of small business failure in Africa.
2. Limited access to credit
African entrepreneurs often face scepticism from both local and foreign investors. Global venture capital views African markets as high-risk, while regional banks require collateral or credit histories that informal businesses cannot provide. Even a profitable small enterprise may be denied a loan simply because it lacks audited financial statements or proof of revenue. Consequently, funding tends to flow to formal, registered companies, leaving informal entrepreneurs excluded from economic growth opportunities.
3. High failure rates
Insufficient funding and cash-flow challenges mean that fewer than half of African startups last beyond a few years. A single bad sales month can wipe out a small business that has no savings or external financing. Breaking this pattern requires tools that help startups manage finances, demonstrate business performance, and connect to investors. AI technologies are now filling this gap.
Related article: How AI Can Help African Startups Scale
AI as a financial assistant
AI tools can act as digital accountants, analysts, and advisors for startups that lack financial expertise. They automate record-keeping, provide insights into spending, and generate simple financial statements that investors can trust.
Automated record-keeping
AI-powered accounting platforms such as QuickBooks and Xero automatically record transactions, categorise expenses, and produce reports. Entrepreneurs can link their bank or mobile money accounts, allowing the system to track all payments and generate profit-and-loss statements without manual input. Tools like Expensify can even scan and log receipts. These features make it easier for informal businesses to keep organised digital books and demonstrate financial discipline.
Chatbot-based accounting
For small entrepreneurs who operate primarily through messaging apps, AI chatbots offer simple bookkeeping support. A WhatsApp-based AI assistant like Timart AI can record sales and expenses in real time, for example, by texting “Sold three pairs of shoes for ₦15,000,” which the bot logs automatically. This turns everyday communication into financial data and helps businesses maintain consistent records with minimal effort.
Business insights and analysis
Beyond record-keeping, AI can analyse business trends. A retailer using AI tools can learn which products sell best, when sales peak, or how costs can be reduced. These insights help owners make smarter decisions and prepare clearer business cases for lenders. Essentially, AI transforms raw data into actionable information, giving informal startups the financial visibility investors expect.
AI for investor materials and funding discovery
Funding isn’t only about loans; many startups need to attract investors, grants, or venture capital. AI tools can support founders in creating professional materials that increase their chances of securing funding.
AI-assisted writing and pitch decks
Generative AI tools like ChatGPT and Notion AI can assist entrepreneurs in crafting clear business plans, grant proposals, and investor emails. They can also generate pitch decks using presentation tools like Beautiful.ai or Pitch, which saves time and ensures quality. Even without design skills, founders can present their ideas professionally to investors.
Targeted funding discovery
AI-powered databases like Crunchbase AI and PitchBook can recommend investors based on a startup’s sector, geography, and stage. Instead of sending generic pitches, founders can target funders who are most likely to support them. Some platforms even analyse investor preferences and suggest the right tone or structure for outreach messages.
Language and translation support
AI translation tools help bridge language gaps. A French-speaking founder in Senegal, for example, can use AI to translate business proposals into English for international investors. This inclusivity improves communication and widens funding opportunities.
Homegrown AI innovations driving funding access
Africa’s fintech ecosystem is already using AI to expand access to finance:
- Flutterwave (Pan-Africa) employs AI for fraud detection and transaction monitoring, building trust for businesses and investors.
- Aella Credit and M-KOPA use AI to assess credit risk and offer microloans or asset financing to the unbanked.
- Smartel Agric Tech (Rwanda) and TOLBI (Senegal) apply AI for financial risk prediction in agriculture, supporting farmers’ access to funding.
These examples demonstrate that African innovators are not only users of AI but also creators of AI-driven financial solutions tailored to local realities.
Bridging the informal and formal gap
AI is helping to bridge the divide between informal and formal economies. It enables small traders to manage digital books, access microloans, and communicate with investors via affordable mobile technology. This inclusion strengthens trust between entrepreneurs and financiers while contributing to broader financial transparency and tax visibility.
For policymakers, AI provides a clearer picture of the informal sector’s role in economic growth. For entrepreneurs, it offers a pathway to formality without losing the agility that defines African enterprise.
AI is redefining how African startups access funding. From automating records to building credit scores and creating investor materials, AI tools are giving entrepreneurs both formal and informal the structure and credibility they need to grow.
The future of African enterprise will depend not just on innovation, but on how well startups use AI to formalise, scale, and attract investment.
By embracing AI, Africa’s entrepreneurs can move beyond survival mode into sustainable growth, turning everyday hustle into measurable success.
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