Release number IFAD/29/07

The Africa Enterprise Challenge Fund

Rome -13 June 2007 – IFAD today announced details of a new multi-donor challenge fund that will help poor rural people in Africa by supporting innovative new businesses. The announcement was made in Cape Town at the World Economic Forum on Africa.

The African Enterprise Challenge Fund (AECF) represents an important partnership between members of the international development community, including the African Development Bank, the Consultative Group to Assist the Poor (CGAP), IFAD and the United Kingdom’s Department for International Development, and The Netherlands Ministry of Foreign Affairs.

“The AECF builds upon our ongoing efforts to eradicate poverty in Africa,” said   Lennart Båge, IFAD’s President. “This is a fine example of international donors working together to bring the best development ideas where they are needed most.

“The fund will make a tangible and sustainable difference to the lives and livelihoods of poor rural people in Africa,” he said.

Challenge funds, such as AECF, have a proven track record of stimulating pro-poor economic growth. The AECF will be the first challenge fund to be based in and designed for rural Africa. It will encourage the development of agricultural and financial markets in rural Africa by offering matching grants on a competitive basis of up to US$1.5 million to projects which meet its development goals.

The fund is designed to encourage businesses to think of poor rural people as potential entrepreneurs, consumers and employees. Challenge funds have proven effective in stimulating business innovation. The grants provide a powerful incentive to encourage the private sector, which often has substantial expertise and financial resources, to risk branching out into areas they might not have otherwise considered.

“The importance of fostering entrepreneurship and business development in rural Africa cannot be overstated,” said Båge. Poverty is predominantly rural in Africa, with more than 70 per cent of the continent’s poor people living in rural areas.

AECF will run for seven years, starting in 2008. It has already secured most of the capital needed to start operations on schedule.

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IFAD is an international financial institution and a specialized United Nations agency dedicated to eradicating poverty and hunger in rural areas of developing countries. Through low-interest loans and grants, IFAD develops and finances programmes and projects that enable poor rural people to overcome poverty themselves. There are 195 ongoing IFAD-supported rural poverty eradication programmes and projects, worth a total of US$6.7 billion. IFAD has invested US$3.1 billion, with cofinancing provided by partners including governments, project participants, multilateral and bilateral donors. These initiatives will help about 86 million poor rural women and men to achieve better lives for themselves and their families. Since starting operations in 1978, IFAD has invested US$9.6 billion in 738 programmes and projects that have reached more than 307 million poor rural women and men. Governments and other financing sources in recipient countries, including project participants, contributed US$9.1 billion, and multilateral, bilateral and other donors provided another US$7.1 billion in cofinancing.