Entrepreneurial Financing in Africa during the COVID-19 Pandemic

Abstract

Access to finance by small-to-medium-enterprises (SMEs) remains an enigma that still warrants further research. The COVID-19 pandemic has exacerbated the funding gap and necessitated the need for entrepreneurs to seek alternative financing due to tight credit rationing by the traditional finance institutions. There is a marked increase in demand for alternative online finance known as crowdfunding amid social distancing and lockdowns occasioned by the COVID-19 pandemic. The main objective of this study was to examine the trends in the financing of African SMEs during the COVID-19 pandemic with a particular focus on crowdfunding. The postpositivist research philosophy and deductive strategy was adopted in this study with the view to test an existing theory and hypothesis. Secondary data sourced from TheCrowdDataCentre were utilised for the study. Eight hundred and fifty-nine African crowdfunding campaigns were employed as the unit of analysis. The study employed econometric techniques to test the research objectives of this study. The probit model was employed in the analysis. The results of the study revealed that backers, the COVID-19 and social network variables were positively and significantly related to campaign success. On the other hand, duration was found to be negatively and significantly related to crowdfunding success. The study contributes to the growing literature on the impact of COVID-19 on crowdfunding performance, as well as the literature on alternative sources of finance.