Unconventional wisdom: Three lessons from a pioneer of revenue-based finance in Africa

“I can grow my business without giving up control, and without needing collateral. That’s what drew me in.” For Jesse Onomiwo, founder of Sparkles and Riltouche Ltd in Nigeria, the appeal of revenue-based financing (RBF) was immediate. Like many entrepreneurs across Africa, Jesse found the traditional funding landscape out of reach or out of step with how his business actually grows. When a WhatsApp message in an alumni group alerted him to Unconventional Capital, or Uncap—an Africa-focused investor offering an innovative financing model—it felt different. There was no pressure to pitch to a roomful of investors, no requirement to hand over assets, and no board seat to give up. Instead, repayments were tied to business performance, and the application could be done entirely online.

In theory, RBF holds a lot of promise. It offers flexible, risk-sharing capital without requiring collateral—aligning funder and founder interests. Entrepreneurs repay investors gradually through a share of their monthly revenues, with repayments going up or down as a function cash flow cycles. E-commerce platforms and payment aggregators follow a similar formula when they offer their merchants loans that are repaid as a percentage of sales. So do “musharakah” contracts in Islamic finance—agreements that govern the sharing of profits and losses between partners.

But turning this theory into a functioning investment model for emerging markets is not easy. Revenue data are hard to track. Repayments can be unpredictable. Financial sector experts from the World Bank’s Finance, Competitiveness and Investment Global Practice and its Africa Gender Innovation Lab have worked with Uncap and other pioneers of RBF to better understand and overcome these challenges. As Uncap has learned, it takes time and iteration to get it right.

At its core, Uncap’s investment approach is simple. The firm invests up to €100,000 in early-stage businesses, typically between 1.3 and 1.8 times—which entrepreneurs repay in monthly instalments linked to their revenues. There is no requirement to hand over equity, no penalties for early or delayed repayment, and the relationship concludes once the agreed return is reached. The approach is designed as a flexible alternative for firms that fall into the financing “missing middle,” those that are too large for microfinance and too early for traditional banks or equity investors.

Uncap began deploying RBF at scale in 2022 and early 2023, funding 87 businesses across Kenya, Nigeria, Rwanda, and Uganda. The results from the first cohort were mixed. Many of the companies were still recovering from COVID-19 disruptions, and Uncap’s light-touch, technology-driven operating model proved challenging for small and medium-size enterprises in the African market. Repayment rates lagged. Uncap paused new investments in 2024 and focused on learning. In 2025, Uncap is restarting investments with a sharpened model that reflects what it has learned.

From the first round of investments, three key insights emerged.

First, targeting the right firms is crucial. RBF is best suited for businesses with seasonal cash flows and strong fundamentals—firms that might not qualify for bank credit but have a clear path to growth. In Uncap’s case, this meant shifting the focus to businesses operating in agriculture-adjacent sectors like processing, packaging, and marketing. Uncap also raised the bar for eligibility. New applicants must now show at least 24 months of operations and meet baseline revenue and profit margin thresholds. In addition, although Uncap previously took an equity stake that entrepreneurs would then repurchase over time, this is no longer a requirement in the new investment round.

Second, tracking revenue accurately—and making repayment easy—was the biggest operational challenge, and one that Uncap has worked hard to fix. In theory, tying repayments to monthly revenues ensures fairness and flexibility. In practice, it requires reliable data systems that many early-stage firms simply do not have. To close that gap, Uncap introduced a triangulated approach. Entrepreneurs now report revenue through three channels: they are introduced to accounting software, submit self-reported data, and upload bank statements via Uncap’s own software platform, Level. Uncap estimates the most likely revenue figure and generates a monthly invoice, which can be paid immediately via mobile money—a process designed to reduce friction and improve compliance. Early evidence suggests that the changes are working as repayment rates have more than tripled over time.

Third, while RBF is theoretically well-suited to women entrepreneurs, boosting gender equity in practice takes more than removing collateral requirements. At the application stage, nearly 30% of ventures were women-led—a much higher share than most venture capital pipelines. However, as firms moved through due diligence and investment screening, the numbers dropped. Women-led firms tended to be smaller, with lower revenues and profits, and fewer of them made it through the final cut. Uncap is now preparing a dedicated funding round tailored specifically for women-led businesses. This funding round will consider not only access, but also the kind of support needed to ensure that women are represented at every stage of the investment process.

RBF may not be simple to implement, but it offers something few others do: a model that meets entrepreneurs where they are. Uncap’s experience shows that impact comes not just from writing checks, but also from listening, adapting, and building the systems that make flexible capital work in the real world. RBF will not replace traditional finance, but it fills an important gap—and that gap is especially wide in low-income markets.