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#InDevelopment: SDGs - 1 year on: how can challenge funds and other grant-making mechanisms support sustainable development?

This month the Sustainable Development Goals (SDGs) are one year old. This month our #InDevelopment blog series is reflecting on the last 12 months; delving into successes, barriers to progress and some specific approaches to development that have the potential to support sustainable development. Defrim Dedej, Palladium’s Director of Grants, oversees 36 different grant programmes and here explores the transformational power of smart grant mechanisms and how they can be improved to better respond to development needs.

Why do smart grants work?
Grants have the potential to be an efficient and effective way for aid agencies to meet their objectives. They allow them to identify organisations that have the ability to make a real impact and invest in their vision. Grants can also provide a great deal of flexibility in terms of project timescale, the size of the financial contribution and the geographical area of focus.

So grants can be flexible and as such very effective; but they also encourage collaboration amongst donors. As a financial engagement, grants are not laden with the legal and administrative complexities of joint ventures. They give an opportunity for multiple agencies to pilot development solutions using relatively small amounts of money. This means donors can respond to issues quickly, collaboratively and without the burden of extensive staff recruitment and expensive in-house project design.

At their best, grants support innovative organisations who initially require small-scale support to demonstrate the potential of their product or solution. Challenge funds provide donors with the freedom to fund experimental ideas without high costs or long-term commitments. In the most successful cases, grants unearth the innovations that change the way we ‘do’ development.

Two such examples can be seen within Palladium’s own project portfolio. The SPRING Accelerator, with activities in Eastern Africa and now in South Asia, is a pioneering accelerator that uses human centred design to transform, and provide investment support, mentorship, and technical expertise to businesses that can improve the lives of adolescent girls. Founded by DFID, the Nike Foundation and USAID, SPRING is delivered by a collaborative consortium of partners globally and helps businesses pilot strategies more quickly, and learn for themselves through in-depth research, prototyping, and iterative design throughout each element of the programme. Entrepreneurs receive a small amount of funding to support prototyping and efforts to scale and sustain their plans for expansion.

SPRING entrepreneurs receive a small amount of funding to support prototyping and efforts to scale and sustain their plans for expansion

With a similar focus on innovation support, the DFID funded Human Development Innovation Fund (HDIF) is aiming to cultivate a strong and sustainable innovation and entrepreneurship ecosystem in Tanzania. Specifically, HDIF supports ideas that aim to improve the quality and access of services in the three focus sectors of health, education and WASH. The programme continues to catalyse the development of new models of service delivery, the use of new technologies, involvement of new providers and establishment of new partnerships, with a focus on the private sector and public-¬â€private partnerships.

By awarding grants to a wide range of organisations – by size, geography, sector focus and capability – donors can draw on knowledge, experience and networks to which they would not otherwise have access. Avoiding institutional inertia is critical in responding to the greatest challenges we face. Actively supporting organisations with different backgrounds is of huge value to best practice.

HDIF is aiming to cultivate a strong and sustainable innovation and entrepreneurship ecosystem in Tanzania.

Four areas for improvement
Of course no funding mechanism is perfect, and neither is there a mechanism that is suitable for all situations. Grant-making is no different. Below are four critical areas where we have the potential to make improvements and enhance the impact of grant and challenge fund mechanisms.

1. Be more proactive
Grant-making can be deployed in many situations, but it is best used proactively and strategically. This will focus grants on the causes of issues, rather than firefighting symptoms.

2. Be creative – multiple application
Grant-making is a flexible mechanism and doesn’t have to exist in isolation. Grants are valuable components of projects that require seed funding for a range of start-up initiatives alongside technical assistance and mentoring, and they can also be used as a project’s leading edge for private sector engagements. Seeing grants as a smart development tactic will ensure we avoid any tendency to see the awarding and administration of grants as an end in and of itself.

3. Coordinate and collaborate
Whilst grants do facilitate collaboration across aid agencies, it is an underdeveloped benefit. The scale of the challenge we face in the Sustainable Development Goals is huge. We are facing a shortfall in total global aid contribution. Government agencies operating in isolation are not in a position respond in totality to any one of the goals. Coordination and collaboration is massively important if the collective value of smart grants is to be realised.

4. Selecting the right mechanism – challenge fund vs direct grants
Different grant-making mechanisms are appropriate for different circumstances. For example, if a project is looking to tackle an elusive problem with no clear best practice approach, a challenge fund unearthing new and innovative solutions may be the best option. By contrast, if a donor is aiming to establish a local public-private network to collaborate on a particular development challenge, direct solicitation of specific organisations may be a more pragmatic way of kick starting an effective initiative. In either case, selecting the right approach is critical to the success of the project.

Creating an alliance for change
Meeting the Sustainable Development Goals is a vast challenge. What is clear is that traditional models of aid are not sufficient to meet this challenge head-on. We require broad alliances that leverage the skills and capital of the global community- between communities, governments, civil society and the private sector. In achieving sustainable development, grants have a vital role to play in facilitating such alliances - bringing stakeholders together to solve some of today’s most pressing development challenges.

For further information, please contact Defrim Dedej (

 InDevelopment is Palladium’s blog series exploring emerging, cutting-edge and profound themes in global development. You’ll hear from our global experts and guests every two weeks. For more from Palladium’s International Development work follow us on Twitter, LinkedIn, Facebook and at #InDevelopment.

About the author

InDevelopment September contributor: Defrim Dedej is Palladium's Director of Grants.

Defrim has 12 years of experience in designing and implementing strategic grants and CSR programs at local, national and international level, leading teams of two to fourteen staff members. He has designed and managed over 65 grant-making programs, awarding grants to NGOs, Private sector and Governments, ranging from £600K-£141m in budget funding projects in variety of fields including; private sector/business development, M4P, employment/skills training, agriculture, health, education, forestry, climate change etc. He has 300+ hours of presenting and training on a wide variety of subjects including innovation, budget management, M&E and project management.