Challenges of Startups in Algeria: Support and Financing Mechanisms

Abstract

Governments’ interest in small and medium-sized enterprises has increased in recognition of their pivotal and fundamental role in economic development. This interest is not limited to developed countries but also extends to developing nations, due to their importance in driving growth to keep pace with economic developments on the one hand, and diversifying income sources on the other, given their presence across most sectors. Nevertheless, they require various types of support, with financial support considered the foundation.

In the case of Algeria, after independence it undertook a series of economic reforms and repeatedly established support bodies, including those related to financial support. However, this faces challenges arising from several factors: some are shared with most countries worldwide, such as financial particularities regarding information asymmetry between these enterprises and financing institutions; while others are specific to Algerian startups, such as the narrowness of financing sources, especially those that help reduce the effects of information asymmetry like institutions requiring equity participation. Added to this are the weak characteristics of startups, particularly their limited control over technology, which is essential for attracting specialized financing institutions.