Here’s my latest brain dump, borne from some significant personal and organisational experience in Challenge Funds – some of it will have wider application than just challenge funds.
So, what is a Challenge fund?
Typically, a large institutional donor recognises that a systemic blockage exists in a value chain or an economic ecosystem and presents a CHALLENGE to the various stakeholders vested in that system. Funds are made available to alleviate or even solve that challenge in the hope that momentum and catalytic change might be achieved. So far so good…….
Partners are found to coalesce around the challenge and collaborate to its shared solution – these might be governments, private sector bodies, other donors etc. Intervention programmes are designed to “call-out” the challenge and demonstrate lasting impactful outcomes. So far still good…….
So, what could possibly go wrong?
The challenge being addressed is usually multi-facetted, and having drawn in a number of stakeholders the CHALLENGE has its own challenge – everyone wants a piece of it. Soon the essence of the challenge is lost. Let me illustrate:
Lack of investment prevents business growth. Business growth leads to job creation and downstream household income security. Challenge in its simplest form – lack of investment.
A measure of whether investment is getting through might be business growth and new job creation. Still pretty linear and straight forward……….
BUT we have invited in stakeholders and opinions that within their own ambit are entirely legitimate. However, these opinions begin to blur the challenge: Are they jobs for women? Youth need jobs too; How much is a secure income? What are the consequences of that income shift on household expenditure and nutrition? Do more kids go to school? Who made those decisions? What are the consequences of those investment decisions on the environment?
So, when the programme is designed there is a very great temptation to reflect as many of these voices as possible.
Actors and their roles
Donors and their agents are obsessed with their own agenda and often (though some exclusively) forget the actors they engage with have specific and distinct roles. I have two key examples from experience to guide the cautionary tale:
Small and medium size enterprises ARE BUSINESSES. They are not pseudo development agencies. It is unreasonable to expect SME’s to push for a development goal when there is no commercial imperative, because this is called a COST. Business generally does all it can to minimise cost and maximise return. Too many donors and development players hit a wall over this.
Small holder farmers are subsistence PROVIDERS and MICRO ENTERPRISE OPERATORS. They are not climate warriors. Again, in my experience small holder farmers are very prepared to take on new information, practice and products if they can see the short-term benefit. They may buy-in to the long-term ambition, but it is not their priority.
There are some other talking points – and we may explore these in more detail another time, but let’s get the ball rolling:
Be on the lookout for:
We are not looking for bridges and airports, but the legacy development programmes has often sought is to be – but rarely achieved – sustainable beyond its limited implementation window. In a post COVID world in which travel is likely to be far more restricted, greater focus and resources must be in invested in making sure the broader development goals are not lost. Indeed, programme management is expensive, but harnessing the resource, energy and connections of vested partners is a key facet of sustainability in migrating that initial ambition and funding the development of key partners (Industry/sectoral apex bodies, NGO’s)
Early cognition where political will is absent or where policy intransigence is part of the challenge is vital. In truth this lies with the donor – in their decision to proceed and how they have laid the ground-work for the fund to operate. Ignorance here will waste time and money.
In many parts of the world the vested parties are not just commercial or political – they can be tribal, cultural even philosophical. Some of this can be enhancing, but much of it can be directly and intentionally undermining. Competing interests need to be recognised if not managed.
Local integration brings many of the points above together. Courting allies and adversaries alike is a vital tactic. Leveraging the strengths and mitigating the doubters.
Here is another key take away:
The return on investment can and may take many forms – from a development perspective we may seek for impact return on climate,gender, jobs, etc . The donor must clearly state what is an acceptable level of return. However, the expectations must be simple (not simplistic) to allow for clarity of design and purpose – it also leaves room for us to celebrate when there are consequences, we might have hoped for but couldn’t directly strive for in our plans.
Andy Simpson is the Managing Director at Imani Development South Africa. He has extensive experience in private sector financing, programme design and evaluation of public, private and donor-funded programmes. Andrew is currently Project Manger on the AGRIFI Kenya Challenge Fund and the Enterprise Zambia Challenge Fund, where Imani Development provides technical oversight and operational support on these programmes.