Challenge funds and matching grants


Enterprise challenge funds award grants or subsidies through a competitive process to private sector organizations that submit solutions with an explicit public purpose. Companies working within a specific sector are invited to submit project proposals for inclusive businesses that aim to solve a stated development problem and generate high pro-poor impact. Challenge funds can trigger new ideas and innovative solutions or promote the scale-up or growth of existing solutions. Proposals are assessed against transparent and pre-determined criteria.[1] Successful applicants must often match a certain percentage of the grant with own financing and/or in-kind contributions.

The number and volume of funds has grown rapidly since the 1900s. Funds ranges from approximately $1.5 million or less up to $207 million and can address a variety of issues, sectors, or countries or on just one sector or country. Companies are attracted to challenge funds due to their risk-willing capital, rather than the access to subsidies.[2]

Points to consider

  • Management requirements:  Enterprise challenge funds tend to be administratively demanding with management costs accounting for approximately 20-50 percent of total budget allocation. The delegation of fund management to an independent organization is an option.
  • Evaluation requirements:  Enterprise challenge funds lack adequate impact measurement systems. Critics point out that there are still very few evaluations of challenge funds to date. Furthermore, those evaluations seem to be focused too much on management issues and not enough on the evidence for the additionality of the funding and on the systemic pro-poor impact.[3]
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Challenge Funds - Policy Case Study on Inclusive Business

“Enterprise challenge funds (ECFs) provide grants or subsidies with an explicit public purpose between independent agencies with grant recipients selected competitively on the basis of advertised rules and processes who retain significant discretion over formulation and execution of their proposals and share risks with the grant provider." ECFs invite companies working in a targeted field to submit project proposals for inclusive business models that aim to solve a specific development problem and generate high pro-poor impact.

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Sweden - Country Case Study on Inclusive Business

Policymakers have expressed interest in learning from peers that have already begun to support inclusive business. To support this request for knowledge-sharing, the G20 Global Platform on Inclusive Business developed a series of short pieces that examine the motivations, institutional coordination mechanisms, priorities and challenges that countries face as they support inclusive business.

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