Capturing Systemic Change from Challenge Funds LEI WAGENINGEN 15 JUNE 2012

1. Capturing Systemic Change from Challenge FundsLEI WAGENINGEN 15 JUNE 2012 David G.V.SMITH david@tripleline.com

2. AECF is a fund of donor money available to the private sector on a competitive basis. Grants and repayable grants. $0.25mn- $1.5mn. Six year contracts. AECF is a special partnership initiative of the Alliance for a Green Revolution in Africa (AGRA). Initial capital was US$36m; now over US$150m – and growing... Offering competitions on continental, country or sector level “Windows” What Is the AECF?

3. Aims and Objectives • Objective: Increase jobs and incomes for large numbers of people living in rural areas across Africa. • Purpose: to make agribusiness, finance, renewable energy and information market systems work better for the poor in rural areas in Africa

4. 89 241 537 4230 6749 14 Rounds/Competitions 5 June 2008 to 31st December 2011 Performance to date Achievements to Date Awarded grants Business plans Shortlisted for IC Concept notes submitted Registered companies

5. Achievements to Date • 89 projects in 17 countries in Africa • US$ 65 million committed (US$ 30 million grant, US$ 35 million repayable grant) • US$ 245 million matching funds committed • Estimated 3 million rural people will benefit from these projects

6. Finding the Right Projects We seek projects that are commercially motivated & innovative to achieve systemic impact • Commercial Motivation: Scale required for systems impact; scale will only be reached if business model is (very) profitable • Disruptive Innovation: as a key indicator of systemic change potential • Upsetting the market such that others will copy and replicate – the more innovative the better • Principle: Start races rather than picking winners

7. The market system and the AECF SUPPORTING FUNCTIONS MARKET PLAYERS Private sector Government Demand Supply Membership organisations Informal networks RULES Not-for-profit sector Information Infrastructure Related services Informing & communicating CORE AECF AECF Setting & enforcing rules Regulations Informal rules & norms Standards Laws

8. What is Meant by Systemic Change? What is it? Regulatory change Changes in Factor markets Crowding-in Copy-cat Innovation How do you find out about it ? Ask the business Laws/regulations formal or informal. Barriers and what you will do about them? Market Information barriers and changes you will make? Access to inputs and skills and the changes you will make? Describe 3- don’t give us a wish list!!. 8

9. Measurement and Accountability Measurement Case Studies Fund Manager + Validation Business Fund Manager 9

10. Makera Rural Cattle Scheme Copycat of other buyers to get improved animals? Systemic Change Crowding in of other businesses? Financial benefits to rural households Development Performance Sales, cost of sales, no sold purchase price gross profit Jobs FTEs Created - team, building Business Performance Change in behaviour. increased supply of steers to feedlot Fattened animals for sale Improved health and genetics of herd Outputs Production of calves for sale Purchase feed Provide extension and support Improved public relations in region Procurement & transport of cattle/calves to feedlot Improved communication with farmers Weekly dipping of animals Building, Recruiting &training Makera Extension team Construction of feedlots Rehabilitation of dip tanks Mobilization of community and leaders Activities Inputs AECF Grant Repayable grant Matching Funds

11. Steps with the Businesses Step 1 Ask the business to define the key development indicators and systemic impacts it will achieve Contract/M&E Workshop : Redefine all the key indicators Define Baseline and need for a baseline study Step 2 Step 3 Set the indicators and targets prior to contracting the business. Finalise a results chain at site visit Step 4 The business reports on key measurable indicators quarterly and development impacts twice annually The FM validates the indicators against the results chain every six months. Step 5 Step 6 Additional Steps: Case studies. Longitudinal Impact

12. Systemic Change and Challenge Funds Innovation is the key to systemic change in markets The key success is in appropriate project selection It is the innovative business that initiates systemic change. The Fund Manager is not a market facilitator! The business can report on systemic change but cannot be responsible for measuring it. Challenge Funds are a cost effective means of achieving systemic change- but be patient for results.

13. THANK YOU

14. ADDITIONAL SLIDES

15. Project ExamplesSmall holder Improvement • Bio United • Ltd • Makera Cattle Company • Zimbabwe • Sierra Leone

16. Input Supply • Agrobiotech • Burundi • Kencor Management • Services (pvt) Ltd • Zimbabwe

17. The market system and the AECF SUPPORTING FUNCTIONS MARKET PLAYERS Private sector Government Demand Supply Membership organisations Informal networks RULES Not-for-profit sector Information Infrastructure Related services Informing & communicating CORE AECF AECF Setting & enforcing rules Regulations Informal rules & norms Standards Laws

18. Process of developing results chains in the AECF