Challenge fund

rdf:langString Challenge fund

rdf:langString A Challenge Fund (also referred to as enterprise challenge fund) is a competitive financing facility to disburse donor funding for international development projects, typically utilizing public sector or private foundation funds for market-based or incentive driven solutions. As Irwin and Porteous (2005) observed, "In practice, the objective of a challenge fund is to provide the smallest possible financial contribution to a socially worthwhile project consistent with making it less risky and more financially sustainable to the private promoter." Applicant qualifications differ widely among challenge funds, but typically focus on non-state actors. Typically, a donor agency (such as UK's Department for International Development (DfID), the Inter-American Development Bank (IADB), Swedish International Development Cooperation Agency (SIDA), and the Canadian International Development Agency (CIDA)) hires a development contractor (such as KPMG or Palladium International) to host the funding competition around a broader sector (such as food trade, agriculture, or education in a specific geography) to solicit innovative proposals that otherwise may not be discovered through more traditional grant-making or funding mechanisms. Alternatively, challenge funds are often used as ways to address what development partners describe as a Grand Challenge, which is a challenge fund focused on soliciting proposals around a very specific critical barrier that, if removed, would help solve an important health problem in the developing world, with a high likelihood of global impact through widespread implementation. Typical features of a challenge fund include open competition, innovative or evidence-based proposals. Proposals are evaluated based on a fixed scoring criteria, and a governance structure that incorporates a voting committee to approve funding decisions. Other common features include a focus on innovation, leveraging other resources, and local solutions. Research performed by TripleLine Consulting identified seven characteristics of challenges funds: "(1) provides grants or subsidies (2) with an explicit public purpose (3) between independent agencies (4) with grant recipients selected competitively (5) on the basis of advertised rules and processes (6) who retain significant discretion over formulation and execution of their proposals and (7) share risks with the grant provider." Challenge funds greatly differ in size, from over $200 million to under $5 million.