Africa Enterprise Challenge Fund (AECF) is a multi-donor funded financing vehicle that provides grants and interest free loans to businesses that wish to implement innovative, commercially viable, high impact projects on the continent.
Established in May 2008, AECF supports businesses in agriculture, financial services, renewable energy, and technologies for adapting to climate change. It also supports initiatives in media and information services where they relate to these sectors.
AECF supports private sector investment which provide solutions that help small holder farmers develop and increase income; develop new markets for agricultural products along the value chain; and increase financial services to businesses and people in rural areas.
It is open to companies all over the world, as long as the idea is implemented in Africa.
Beneficiaries get funding from a pool of donor funds from Britain’s Department for International Development (DfID), Australia’s Department of Foreign Affairs and Trade (DFAT), Ministry of Foreign Affairs of the Netherlands (MFA), International Fund for Agricultural Development (IFAD), Consultative Group to Assist the Poor (CGAP), Danish International Development Agency (Danida), and Swedish International Development Cooperation Agency (Sida).
As programme manager since 2008, KPMG IDAS has grown the AECF from $30 million to about $250 million, run 16 funding window competitions, received and processed 4,500 applications, and approved 133 projects in 22 African countries.
Through this extraordinary growth, the fund has had a positive impact on the lives of about four million poor people living in rural areas.
AECF is pioneering the use of a challenge fund mechanism as a powerful, transparent way to leverage donor funds for private sector development and make markets function better for the poor.
Portfolio
AECF portfolio is spread across 23 countries, with 49 per cent in East Africa, 26 per cent (Southern Africa), 11 per cent (West Africa), 9 per cent (Horn of Africa), and 3 per cent (Central Africa).
Application process
The application process comes in two stages common to all AECF funding windows. The first stage is submission of an initial application form where the applicants write about their business ideas, and about their company(s).
The ideas should not only be in terms of commercial viability but also on potential rural development impact. During the first stage, applications are assessed solely on the quality of written submissions.
An interested business submits application when invited in the Concept Note stage. Once the competition for entries closes, concept notes are assessed, and if successful in the initial assessment, the applicant is asked to submit a more comprehensive business plan in the Business Plan stage.
Being selected, the second stage takes three processes. AECF engages with and visits all companies preparing business plans. Final business plans are presented to the independent Investment Committee for a decision about which business ideas wins the competition for funding.
Once awarded funding, businesses are invited for an Induction Workshop prior to contract signing. The contracting process is followed by reporting and disbursement of funds.
AECF monitors and evaluates the project over the six-year life of the contract.
Evaluation
Grant beneficiaries are evaluated based on their reports which could be quarterly or half-yearly if they need funds disbursed. They are assessed by Fund Managers who undertake monitoring and evaluation visits to projects quarterly.
Visits mainly assess both technical and financial progress.
AECF measures business performance using two key indicators – turnover and profitability.
Turnover, and growth in turnover, are closely correlated with, and are a predictor of, development impact; that is, businesses with a large and increasing turnover tend to generate higher development impact.
Profitability is tracked primarily because, if the business/project idea is not profitable, the development benefits being created will not be sustained after AECF funding ends.
Eligibility
Private sector companies are invited to compete for AECF funds by submitting their new and innovative business ideas to a particular AECF competition. These ideas have to comply with the rules (eligibility and selection criteria) of the particular competition being applied for.
To be eligible for AECF funding you must enter both the amount of grant requested and the amount of repayable grant requested, even if one of them is zero.
The total amount applied for cannot be less than $250,000 or more than $1.5 million. The total is an automatically calculated field on the online form.
The minimum amount AECF requires your company to invest is usually 50 per cent of the total cost of implementing the project.
Contribution
Your share of the total funding may come as debt (borrowing) or equity (cash injection), by yourself or by another partner(s).
In principle, AECF does not recognise the contribution of existing fixed assets such as land and buildings, or of sunk costs, however important these may be to the success of the project.
• With agency report.