Cogent Economics & Finance (Dec 2024)
Building resilience and sustainability in small businesses enterprises through sustainable venture capital investment in sub-Saharan Africa
Abstract
Venture capital (VC) has the potential to revolutionize sustainability in small and medium enterprises (SMEs), yet this area remains underexplored in sustainable finance. This study explores the role of VC in fostering resilience and sustainability within SMEs in sub-Saharan Africa, highlighting the need for increased sustainable financing to address regional challenges and promote resilient business models. While sustainable financing is crucial for promoting sustainable practices, small businesses face barriers in accessing funding opportunities to strengthen resilience. Through explanatory factor analysis (EFA) of data from 61 VC firms across three sub-Saharan African countries from 2015 to 2021, the study reveals that combining VC investments, resilience, sustainability practices, enhanced business performance, market share expansion and introducing new products and services leads to sustainable growth for SMEs. This has practical implications for investors, policymakers, and business owners seeking to elevate sustainability practices as well as enhance business performance through strategic VC financing. Furthermore, the study presents a framework for sustainable VC finance, stressing its role in driving sustainable growth and market expansion in small enterprises. This contributes to the literature by deepening understanding of the relationship between VC finance, resilience, sustainability, and business performance. Thus far, the varying levels of economic development and sectoral disparities across sub-Saharan Africa may impact the scalability and effectiveness of sustainability practices driven by VC. These contextual challenges raise concerns about the equitable distribution of VC benefits and the depth of their impact on small business resilience and sustainability ecosystems.
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