Raising Capital Through Grant Funding

This is a four-part series, where we engage Irene Ikomu, The Muyi Group’s CEO (Chief Executive Officer) on her insights and thoughts on raising capital in Africa with a special focus on Grant Funding. Check out our Insights page for other parts. 

Question: For an organization trying to raise capital, why do you think grant funding is a great alternative to other forms of funding? 

IK: First, I should, I should point out that Muyi helps with capital fundraising for different clients and connect the right partners with a bias towards grant funding specifically. So, we do not connect to equity or debt. We specifically lean towards grant funding. And I think that the reason we focus a lot on grant funding for nonprofits, social enterprises, and businesses on the continent is because of the several advantages of grant funding,  

One is just the ability to be able to access much-needed capital without the burden of paying the interest from debt or giving up equity. For businesses, nonprofits, and social enterprises that are operating in Africa, that is a fantastic opportunity because you have interest rates in some countries up to 23%, which can make it exceedingly difficult to grow. It is also still hard to get Equity Partners as the sector is still nascent and you do not have a lot of local capital because our GDPs are so low.  

The second benefit of grant funding is that as the world prioritises sustainability and protecting the environment future, grant funding has an edge over for example, debt or equity as it helps organizations think through what contribution they can make beyond their bottom line or for non-profits to think beyond the immediate activities and plan for future impact. 
There is already a skewed advantage for non-profits in grant funding because they are, by structure, already oriented toward impact. But increasingly opportunities are growing for social enterprises that balance impact and profit, and even for businesses that operate in critical development sectors like education, technology, and internet access, among others. For businesses, it makes you think about adjusting your bottom line from just money to thinking about people, and the environment and to think about what kind of problems you are trying to solve and how you are trying to solve them in a way that is aligned with global development goals.  

And so, because of this, grant funding is a very patient partner for many nonprofits, social enterprises, and businesses, as it offers a wonderful way to focus on expansion. You will find that there are certain things you are already doing, but you have new areas you want to grow in. If you have new people you would like to reach, new communities you would like to expand into, grant funding gives you that safety network, that cushion to be able to expand again with patient capital. 

Another benefit is the potential for increased investment in research and innovation. The thing with grant funding is that there is always a question about what else you are doing. What is unique about what you are doing? How are you pushing the needle further? If we are talking about problems like development, how are you solving them in a way that is taking it further than what exists? So, that push helps a social enterprise, business or nonprofit fuel innovation and research, and we do not have a lot of money invested in research and innovation in Africa. 

Finally, and perhaps the most important, is that grant funding helps us reach the people who are underserved the most. Grant funding allows you as a beneficiary to think about those who are living on the margins and how you can bring them into the mainstream. So, it helps us go back and reach the underserved, the un-bankable, to the people in the fringes of society and to try and focus on how we can deliver services and resources to them.