2 Responses

  1. David Elliott
    David Elliott September 4, 2014 at 7:01 pm

    Thanks Robin. A useful contribution. In my tell-tale “pithy” style, I’d like to offer a short observation.

    Giving Enterprise Challenge Funds a Chance. Youthful. Promising. Almost there. Really? If we’re to look forward to a glass half full, we should at least be clear that when looking back the glass wasn’t actually half empty. So let’s look back briefly…

    Looking back a little, the ECF hangs almost entirely off its face saving mobile banking project (WING Cambodia). Evidently, this one project (of 23) accounts for 93% of total ECF beneficiaries reached, and 78% of the net income generated. Strip it out and the cupboard is almost bare.

    Looking back a little further, according to a recent DFID report (“Meeting the challenge: How can enterprise challenge funds be made to work better”, April 2014) at least GBP 850mn has been invested in challenge funds over recent years. AusAID should be praised for subjecting the ECF to a CBA assessment, as none of these funds have come under anything like a similar level of scrutiny. But then again, why should they when they too can hang off their face saving mobile banking project (M-PESA)?!

    Looking back even further, again according to the above mentioned DFID report, challenge funds can be traced back in the UK to 1714, and the Longitude Prize. How did this perform? Well, none of the major prizes were ever awarded. John Harrison, the esteemed clock maker, cracked the challenge of measuring longitude with his sea clock, then marine watch. He did this through his, and other private investment and endeavour. He was finally awarded £10k by the British Government 50 years later in 1764, when at the ripe old age of 71 his best work was behind him. Innovation? Additionality? Leverage? Really?

    Youthful. Promising. Almost there. Isn’t 300 years long enough for researchers to learn something of value Robin?

    John Harrison’s marine watch allowed sailors to find their way through the maritime mists. Who’s finally going to step up and help the development sector navigate their way through the deep layers of Challenge Fund Fog?

  2. Amanda Jupp
    Amanda Jupp September 4, 2014 at 12:30 pm

    Thank you very much for this discussion Robin. It is good to see this research debate and discussion in the field of challenge funds.

    It is important to consider the expected outcomes in advance for challenge funds and working in private sector development in general. Does the program intend to use the business as a vehicle to achieve development outcomes (such as innovative new products or to link to a particular supply chain) or to change the business to achieve these means?

    The ECF was a pilot program which means that the objective was intentionally broad in order to feed into discussions like this around what works best and in what context. Importantly, DFAT provided additional resources for strong monitoring, research and external evaluation – these are all available on the ECF website (www.enterprisechallengefund.org).

    The ECF ran in both Pacific and South East Asia – two very different regions demographically, economically and with very different in business environments – and the results were similarly differentiated.

    In the Pacific, the fund worked with more small-medium businesses. There were fewer larger businesses and the development outreach (also called employees, suppliers or customers by the companies) was smaller. Interestingly, the quality of outreach (the dollars that the beneficiaries earned) was higher. This approach was more consistent with an ‘enterprise development’ objective.

    In Asia, there was a much larger pool of businesses to work, larger populations of beneficiaries and it was easier to have a “business modification” objective in this environment. An independent review found that a future challenge fund would work well in Asia – and potentially it could be used to incentivise companies to expand into more remote areas; innovate new products for the poor and could potentially go some way to address growing inequality.

    This also raises a final point that it is important to consider the approach and the context not just at the design but during implementation. In smaller markets, operating a fund targeting only larger companies with a ‘business modification’ objective may quickly reduce the pool of eligible companies to work with – and as it progresses, the fund may need to consider either pulling out or changing objective to work with smaller firms.

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