This review explores AusAID’s support to overcome market failures and stimulate private sector investment through the Enterprise Challenge Fund (ECF). The ECF targets multi-sector, pro-poor market development interventions in nine countries across South East Asia and the Pacific Islands. This document serves to assess the efficiency and effectiveness of ECF projects in the nine countries by providing a detailed analysis of how the program can be enhanced. This includes advice on replicating success, and how to deliver investment in, and support of, innovative solutions to ensure sustainable market development.
- AusAID’s Enterprise Challenge Fund is failing to translate its rationale into practise. It has sought to engage in projects without adequately understanding the market failures that it is trying to overcome.
- The Enterprise Challenge Fund also fails to balance its commercial objectives with its social objectives.
- It lacks a comprehensive strategic framework, as well as an appropriate evaluation and organisational structure. All three factors have negatively impacted the project.
The Enterprise Challenge Fund is an innovative means of sharing risk with business to achieve pro-poor growth. It operates in Cambodia, Laos, Eastern Indonesia, Southern Philippines, East Timor, Papua New Guinea, Solomon Islands, Fiji and Vanuatu. Through open competition, grants of between AUD100,000 to AUD1.5m are awarded to business projects demonstrating clear pro-poor benefits.
The study highlights the limitations of pro-poor investment without sufficient planning. It is particularly valuable to investors, development practitioners or researchers interested in the implementation of market development initiatives using challenge funds.