Note: The deadline for applications has passed and we are in the process of rolling out the successful projects. The lifespan of the projects will run over the next 12 months and there is no second round for applications.
The Key Features of a Challenge Fund
Challenge funds typically involve the use of public money to catalyse innovation by established private businesses, and to promote profitable ways of improving market access for the poor. The kind of innovation targeted by a challenge fund is often unlikely to happen without some form of initial external stimulus. The strength of a challenge fund lies in its ability to be focused, entrepreneurial, opportunistic and cost-effective, i.e. to function as a temporary market development catalyst.
The Shared Growth Challenge Fund
The Shared Growth Challenge Fund provides the use of one-off grants to private companies (or to consortia led by private companies) to support 'pro-poor' innovation, and provide profitable ways of improving market access for the poor.
The Fund aims to stimulate private sector investment and risk-taking, and to discover new ways of working, where the costs and risks of specific ventures may not be well known, and where the social impact may be significantly larger than through conventional approaches. The Shared Growth Challenge Fund seeks to improve the alignment between the core business strategies of private companies and their development outcomes.
The Shared Growth Challenge Fund is operating as a social venture capital fund. A amount of R35m has been earmarked for disbursement over two years, enabling individual grants of between R0.5m and R3m. In exceptional cases grants of up to R5 million may be made.
Basic Approach and Principles
The Shared Growth Challenge Fund subscribes to the following core operating principles:
- Innovation - Challenge funds must recognise, catalyse and capitalise innovation by applicants.
- Competition - the allocation of challenge fund grants is determined by an open, competitive process. This encourages focus, good ideas and comparability.
- Additionality - Challenge fund grants need to target activities and investments which would not have happened without them, and where the uncertainty and risks involved preclude access to conventional sources of funding.
- Portfolio approach - within the requirements of sectoral and regional focus, challenge funds need to pursue a portfolio of investments, diversified according to risk, participating partners, and social and market development impact.
- One-off, limited duration grants - challenge fund grants need to target specific risks, barriers and opportunities which are clearly defined and which require limited, temporary support.
