A challenge fund is a financing mechanism to allocate (donor) funds for specific purposes using competition among organizations, mainly small and medium size companies as the lead principle. A challenge fund invites for proposals from companies, organizations and institutions working in a targeted field to submit project proposals. Challenge funds are always set up to meet specific objectives – such as extending financial services to poor people or finding solutions to a specific health problem in developing countries.
Proposals are assessed against transparent and pre-determined criteria. Successful applicants must usually match a certain percentage of the grant with own financing. The challenge fund awards grants to those projects that best meet the objectives of the fund and fulfill various pre-established eligibility criteria.
Examples of Sida supported Challenge Funds
Innovations Against poverty
A major challenge fund within Sida is the Innovations Against Poverty program. The challenge fund provides matching grants (maximum 50 per cent) to entrepreneurs or companies with innovative products, services, systems and business models that serve, create opportunities and benefit people in poverty. Examples of projects that have received support include new types of battery chargers, rural renewable energy, municipal sanitation, safe drinking water and farm business advisory. It is open for applicants from all over the world and also has a special window for the Middle East and North Africa region.
Africa Enterprise Challenge Fund
The Africa Enterprise Challenge Fund (AECF) supports profitable ways of raising rural incomes by developing markets for products and services that meet the needs of the rural poor. AECF has an agribusiness window as well as a special window for post-conflict countries.
Read about Private and public sectors merge to support farmers in Africa.
Emprender Paz
Innovation for Peace – Emprender Paz is a Columbian challenge fund promoting and mobilizing private sector contributions to peace-building. The objective is to result in more companies being committed and actively participating in the development of peace-building initiatives as part of their core business.
Powering agriculture
The agricultural sector is the most important source of income for many people living in low-income countries, but lack of access to reliable, clean energy is a major barrier to its development. Powering Agriculture: An Energy Grand Challenge for Development is a grand challenge for development that encourages innovative technological and financing solutions for providing reliable and clean energy to the agricultural sector in developing countries.
Making All Voices Count – A Grand Challenge for Development
Making All Voices Count is a challenge fund jointly funded by Sida, USAID, DFID and Omidyar Network aiming to create and apply innovations that support people-centered, open government. Through financial and technical support the challenge fund supports efforts of citizens and governments in emerging democracies to work together.
Seed Alliance
Seed Alliance is a challenge fund aimed at Internet Development and Digital Innovation. This funds supports initiatives that utilizes new technologies to make pro-poor projects more effective and inclusive. The main focus of the fund is; openness, inclusion, rights and access.
