In Accra’s Osu district, youngsters pitch apps for agritech, payments, and retail logistics. However, behind this ostensible dynamism, Ghana’s startup ecosystem faces banks that demand hard collateral and venture capital that demands “hockey-stick” growth and easy, billion-dollar exits. Under this backdrop, most SMEs (which employ over 70% of Ghana’s labor force) are left undiscovered and unsupported.
The financing mismatch is not special to Ghana, but here it is especially costly. The World Bank estimates that Sub-Saharan Africa faces an SME financing gap of more than $330 billion annually. Ghanaian firms frequently borrow at interest rates >25%, while local VC funds remain minuscule compared to their counterparts in Nairobi or Lagos. Foreign venture capital, meanwhile, often enters only at later stages, leaving early-stage innovation unexplored. This results in a moribund financial ecosystem marred by capital scarcity, premature exits, and struggling firms that, with the right support, could potentially upgrade and create jobs.
Financial innovation could make a difference here. Financial innovation has historically been one of the most powerful engines of development. In the 17th century, joint-stock companies enabled long-distance trade in the 17th century by pooling capital together to spread risk across investors. As my professor at Georgetown University, William Pegues, explained, new Project Finance structures enabled the construction of revolutionary energy plants, and as Kusi Hornberger explains in Scaling Impact, microfinance brought credit to millions of the poor. The creation of new financial instruments has repeatedly expanded what was possible in emerging economies. Each innovation unlocked capital flows that traditional banking could not provide and created new pathways for entrepreneurship and growth.
Bringing it back to Ghana’s entrepreneurial ecosystem, instead of trying to replicate Silicon Valley’s equity-only VC model, what if we envisioned a market in “VC bonds”: tradable debt-like instruments tailored to startups and SMEs? Instead of trying to replicate Silicon Valley’s equity-only model, with rigid fund horizons and exit structures, EMs could experiment with tradable, revenue-linked venture notes. The interesting element here is not that investors get repaid differently, but that these instruments are liquid and portable–they can be bought and sold, attracting investors who would never tie up capital in a ten-year closed fund. For startups, this means access to patient, flexible capital. For investors, it means exposure to high-growth firms without being trapped until IPO or acquisition.
Why does this matter? Because the structural weakness of VCs in emerging markets is not simply too little capital but too few exit pathways. A ten-year VC fund locking investors in until IPO or acquisition is not best suited to Ghana, where stock markets are shallow and acquisitions rare. By creating a market for tradable VC bonds, Ghana could break the illiquidity trap. Investors could exit early, and startups could access flexible capital without surrendering control. Hong Kong and Singapore already host thriving secondary markets for convertible debt and mezzanine securities. Accra could follow suit, carving a niche by doing the same for early-stage venture papers.
Critics can object that Ghana lacks the institutional capacity for such innovation. But this is precisely where a free-market, rule-of-law approach comes in. The state does not need to subsidize or guarantee these instruments. It needs to enforce contracts, maintain macroeconomic stability, and remove regulatory barriers to financial experimentation. In fact, heavy-handed state SME funds across Africa have too often distorted markets, politicized credit allocation, and crowded out private actors. By contrast, a VC bond market leverages Ghana’s entrepreneurial energy and channels private capital flows where they are most productive.
Another objection is that investors will not buy VC bonds if they face high-level risks but receive only bond-like, capped returns. A steady coupon on a highly volatile SME is, understandably, an unattractive proposition for investors. To solve this, we can re-imagine how risk and return are structured. One approach is a form of portfolio collateralization that mutualizes risk pools, where multiple startups give up slices of equity or IP into a common reserve, cushioning individual defaults. Another way to reduce risk is to tie repayments to supply-chain receivables or purchase orders from larger corporations, tying investor returns to contracts rather than early-stage cash flow from start ups. Finally, we can also create a tiered risk sharing among investors that allows family offices and local pension funds to absorb junior notes in exchange for higher yields, while institutional investors hold safer senior notes. Although these mechanisms do not eliminate risk, they make it tradable, diversified, and priced in ways that investors might accept better.
If successful, such innovation could engender a self-sustaining market mechanism that continuously recycles capital into innovation and entrepreneurship. This not only boosts productivity, but is the real development promise of financial innovation.
It helps that this idea is not a utopian thought experiment. Revenue-based financing already thrives in the United States for SaaS firms. Israel has successfully issued secondary market notes tied to venture performance and quasi-equity funds are spreading in Latin America through blended finance structures. Ghana need not reinvent the wheel. What it needs is the courage to allow markets to adapt venture finance to its realities, rather than contort its startups to Silicon Valley’s playbook.
With such an experimentation, SMEs could access patient, tradable capital, while investors could diversify risk and exit flexibly. Ultimately, Accra could position itself as a continental hub for innovative financing. Right now, where the U.S. is increasingly abolishing aid and subsidies fiscally unsustainable, Ghana has an opportunity to prove that free-market financial innovation can unlock the dynamism of its entrepreneurs.
