AgriCulture & rurAl DevelopmeNt NOTES 64929 iSSue 55 mAy 2011 Agricultural Innovation Funds In order for agricultural development to fulfill its their benefits should exceed their cost (van der Meer potential role as a source of growth and reducer and Noordam 2004; Donovan 2006). Grants generally of poverty, it must be constantly renewed through assign higher priority to investing in know-how knowledge and innovation. Getting resources into rather than equipment, and the resources are used the hands of innovators and providing incentives for for technical assistance, capacity building, services, producers, agricultural service providers, and entre- and analytic studies more often than for operating preneurs to collaborate in developing and applying costs (such as salaries, inputs), costly equipment, new methods and technologies is a priority among or infrastructure. This is particularly so in the case of institutions concerned with agricultural knowledge. matching grants that support enterprise development. While grants have long been used to finance agricul- tural innovation, in many countries there has been a Competitive research grants (CRGs) provide shift away from block grant funding and towards the funding to research based on scientific peer use of innovation funds. These are used to provide review of alternative research proposals. These incentives and resources for investment and collabo- grants, which may also require grantees to provide ration between innovators, producer groups, private matching funds, can promote innovation in several entrepreneurs, and public institutions. Innovation ways, focusing scientists’ efforts on high-priority funds allocate grants to targeted applicants based on research or new fields of expertise. CRGs can a system for evaluating the eligibility, relevance, and be used to improve the relevance and quality of quality of applicants’ proposals. As of 2010, more agricultural research, extension, and training. They than 40 percent of agricultural innovation-related can be used to promote research partnerships projects apply competitive research grants; and more and to leverage research resources. They can also than 50 percent apply matching grants. The latter are be applied to the development of more efficient used primarily for advisory services, small develop- and pluralistic research systems, and are often ment projects, and agribusiness development.1 associated with research system reform. Grants are used to promote a variety of activities. Matching grants (MGs) have also been used Some support demand-driven or adaptive to finance research, but are increasingly used to research, and focus on increasing and improving promote the generation, transfer, and adoption of communication between farmers, extension technologies that are tailored for specific markets. agents, and researchers. Some are used to promote productive partnerships, demand-driven services, and the linkages between producers and markets. They usually consist of a one-time subsidy. Grants were the subject of a report by the World Bank’s Agriculture and Rural Development Department published in May 2010 titled Designing and Implementing Agricultural Innovation Funds. Lessons from Competitive Research and Matching Grant Projects (World Bank 2010). The rationale for providing grants is often associated with the non-rival, public good nature of the investment, such as those which promote innovation, learning, and partnerships to resolve market failures. As instruments of government policy, grants should be coordinated with other policy instruments, and Photo: Gennadiy Ratushenko – Group of people tending flowers in Tajikistan. They are also used to support innovation more generally, DEsIGn IssuEs often by including multiple stakeholders. By consulting with A number of challenges may emerge that reduce the ef- those who will use technologies and other knowledge as fectiveness of grant schemes, including equity and sustain- partners, MGs incorporate issues of demand and use from ability issues, unforeseen administrative costs, and limited the very beginning, and in so doing, may be more effective capacity on the part of participants. Designing grants to pur- than competitive research grants at encouraging uptake by posefully account for such challenges generally begins with farmers and other entrepreneurs. MGs are commonly used articulating the objectives and priorities of the grant to pro- to support private economic activity—agribusiness and value spective participants, and soliciting concept notes describ- chain development. Funds from the granting organization ing how participants propose to pursue these purposes. (usually a public agency) are matched with funds from the beneficiary. Most MGs that target agribusinesses or Defining priorities. Determining specifically which themes farmer groups are not competitive; all proposals that meet and strategic interventions the grant scheme will support the minimum requirements are funded, but are subject to enables funding to be targeted purposefully on a set of technical and financial appraisals based on weighted criteria. clearly-defined priority areas. This avoids situations in which resources are spread too thinly between loosely-related Both CRGs and MGs rely on transparent selection criteria activities while allowing some latitude for supporting initia- and feasibility reviews, and both are short- to medium-term tives that may prove relevant during the period covered by funding arrangements. Neither can replace stable funding the grant. Priorities are often set based on an analysis of for long-term research, private sector development, human existing research and technology development needs and resource development, or infrastructure maintenance and opportunities, and of investment needs. In some cases, development. these priorities become clear through value chain analysis. FIGuRE 1: ThE MAIn sTEps AnD ACToRs AssoCIATED wITh A GRAnT sChEME Prioritization of themes; Communication and awareness creation; Sector development; Coordination; Capacity building. 1. Communication: Direct solicitation of 13. Completion 12. Implementation, 11. Funds released concept notes (CNs) and evaluation reporting, and monitoring for project or call for CNs Training/support to applicants on grant 10. Signing arrangements 2. Submission of CN by by the secretariat applicant requirements Appeal process (as needed) 9. Full proposal endorsed 3. Screening of CN by by board/committee secretariat Full proposal not endorsed (rare) 4. Approval of CN by Field appraisal 8. Comments on the full board/secretariat of CNs proposal submitted CN 5. Development of 6. Submission of full 7. Review of and comments CN proposal to the on full proposal by rejected approved full proposal and adjusted secretariat technical reviewers Appeal process Training on proposal (as needed) development Technical assistance Source: Rajalahti, R. in World Bank 2010. 2 Optimally, priorities should be determined in consultation with the major stakeholders involved in the scheme. ChECklIsT oF ChARACTERIsTICs oF A MATChInG GRAnT pRoGRAM Defining eligibility. Clearly defining the roles of the respec- In An InvEsTMEnT pRojECT tive stakeholders and specifying which groups are eligible to apply for funding can greatly reduce the costs associated Recommended general activities for an efficient with processing large volumes of applications submitted and sustainable grant program: by parties who are not eligible. Significant delays and costs Prioritization of themes/activities targeted by the grants. P occur in awarding grants when large numbers of ineligible Client and stakeholder engagement throughout the P applicants submit proposals, and this has been a major design and implementation. problem experienced by grant schemes. The size of the Capacity-building and partnership facilitation arrange- P projects the grant scheme will support and the activities ments (for example, to grant implementing units, and expenditures that qualify for funding also need to be applicants, potential service providers). clearly defined. Parallel supporting activities to build synergies be- P Engaging stakeholders throughout the process. In ad- tween infrastructure, regulatory and market develop- dition to consulting stakeholders with regards to priority ment activities. setting, stakeholders should participate in the governance Coordination with other programs and actors. P of the grant or program, and be solicited for feedback on Minimum requirements to consider: the implementation process on an ongoing basis. Qualifying them to fulfill these vital roles entails investment in capacity Rationale for grant use. P building and partnership facilitation among applicants, grant Target group: main beneficiary, including eligibility P management staff, and prospective service providers who criteria. often require support to meet the requirements of the grant Eligible activities and expenditures. P program and to capitalize on the opportunities it generates. Anticipated grant demand (volume and time P Stakeholder platforms, forums, and associations are highly schedule). useful in bringing multiple perspectives into the formulation Subproject size, grant range, and match requirement P of sector strategies and action plans, particularly in the early (as relevant). stages of development. Implementation arrangements, including P Grant schemes usually work better when combined implementation units and their roles, and with other efforts. CRGs, for instance, are often used in administrative costs. the larger context of agricultural research system reform Basic implementation procedures, including P programs. MGs that are used to support value chain devel- procurement. opment work best when combined with other, complemen- Monitoring and evaluation arrangements. P tary investments such as those in infrastructure, financial Cost-benefit analysis, using representative examples. P services, collective action, and market development. They also tend to benefit from complementary policies that are similarly introduced to provide enabling conditions that or committee provides oversight and approves subprojects. make overall investment more effective, and more attrac- A technical review panel or reviewers assesses proposals tive to prospective investors. and makes funding recommendations. A body may also be recommended to handle potential appeals. Maintaining Grant Management. The capacity of the grant separate units for policy setting, technical evaluation, administration is one of the most crucial factors to a grant management, and governance is considered good practice. scheme’s success. Most grant schemes require a secretariat to handle day-to-day administrative functions such as processes. The main processes in managing and implement- communication, processing, and monitoring and evaluation. ing subprojects include management of applications, contract The grant secretariat may be located in a government arrangements, disbursement, financial management and agency (autonomous or otherwise), in a nongovernmental audits, procurement, and safeguard management. Calls for organization, or in a private entity. Where it is located should proposals at regular intervals are common for CRGs, which be determined based on the capacity and sustainability of often fund large subprojects and set funding limits for each the institutions, overhead costs, the need to separate the call. An open call for proposals is common for MGs, particu- financing and implementation of activities, the risk of political larly when individual grant amounts are small. In order to interference, and the interests of key stakeholders. A board encourage sufficient participation, some MG schemes, 3 such as those targeting enterprises, may require direct stable core funding and a critical mass of staff. They are communication to prospective participants rather than to less likely to reduce disparities between strong and weak general public awareness raising. Capacity building may be research institutions than they are to strengthen the stron- required to expand the pool of competitive applicants. gest agencies. And while the competitive grant model did not lead to much greater private sector investment in A good practice is to assess the procurement, administra- agricultural research and extension in the four countries, it tive, disbursement, and financial management capabilities did contribute to private sector development more broadly of the applicants and provide training in the main skills and (World Bank 2009a). procedures the grant scheme requires. Financial manage- ment and procurement practices are verified through regular field visits, timely reporting, and audits. The grant References scheme must also assign resources to provide for environ- Donovan, G. 2006. “When Markets Do Not Work, Should Grants mental and social safeguards. Because innovation funding be Used?� Agriculture and Rural Development Policy Note. Wash- is demand-driven, the specific subprojects that will be fund- ington, DC: World Bank. ed—and their potential environmental and social impacts— Elliott, H., and R. Echeverría. 2000. “Characteristics of Successful cannot be identified in advance. A thorough assessment Agricultural Research Competitive Grants Programs.� Chapter 12 in of potential environmental and social effects likely to result Competitive Grants in the New Millennium: A Global Workshop for from the subprojects can provide the basis for establishing Designers and Practitioners. Proceedings. Brasilia: Embrapa, Inter- detailed guidelines for monitoring and mitigating any nega- American Development Bank (IDB), and World Bank. Pp. 191-204. tive impacts. Sehgal, M., J. Srivastava, N. Khan, J. Kampen, and I. Shuker, 2002. “Good Practices in Procurement, Disbursement, and Financial Monitoring and evaluation (M&E). Tracking and docu- Management for Competitive Grant Programs in ECA Countries.� menting the outcomes of innovation funding are too often Environmentally and Socially Sustainable Development Unit, Eu- neglected in grant schemes. Yet having a sound M&E rope and Central Asia Region. Washington, DC: World Bank. system enables grant schemes to identify and address Srivastava, J, J. Kampen, G. Baker, D. Byerlee, and M. Sehgal. problems as they arise. M&E relies on clear indicators 2003. “Good Practices in Monitoring and Evaluation and Man- and milestones purposefully selected to gauge progress agement Information Systems for Competitive Grant Programs in implementing subprojects. The data gathered during in ECA Countries.� Environmentally and Socially Sustainable field visits and documented in progress reports is used Development Unit, Europe and Central Asia Region. Washington, to populate the management information system used DC: World Bank. by the grant scheme, and can be reviewed as needed. van der Meer, K., and M. Noordam. 2004. “The Use of Grants to Specialized M&E personnel can be employed in the grant Address Market Failures: A Review of World Bank Rural Develop- secretariat or the responsibilities can be outsourced to ment Projects.� Agriculture and Rural Development Paper No. 27. independent experts–or both. Grant recipients are often Washington, DC: World Bank. not adept at fulfilling M&E requirements and will benefit World Bank. 2010. Designing and Implementing Agricultural Inno- from specific training and hands-on support. vation Funds. Lessons from Competitive Research and Matching Grant Projects. Economic and Sector Work. Agriculture and Rural The need for more thorough evaluations of the impacts of Development Department. Washington, DC: World Bank. innovation funds is growing more urgent as global demand __________. 2008a. Annotated AIS Database FY90-08. World for agricultural innovation increases. The objectives of Bank, Washington, DC (internal document). these funds entail economic, social, and environmental __________. 2009a. Agricultural Research and Competitive Grant impacts, as well as pronounced effects on the capacity of Schemes: An IEG Performance Assessment of Four Projects in the institutions responsible for agricultural innovation. Yet, Latin America.� Washington, DC: World Bank. up to now, information on how effectively these objec- tives have been achieved is limited. A World Bank assess- This ARD Note is prepared by Riikka Rajalahti and ment of four competitive research grant schemes in Latin Gunnar Larson of the World Bank. It is based on America noted that such grant schemes are more likely the report Designing and Implementing Agricultural to make a lasting contribution to agricultural innovation Innovation Funds. Lessons from Competitive Research and Matching Grant Projects. Find the when they are introduced within relatively strong public report at www.worldbank.org/ard sector frameworks for research—institutions that have 1 As documented in the AIS Annotated Database of World Bank Agricultural Innovation Systems Related Projects (Agriculture and Rural Development Department, World Bank, internal use only). 1818 H Street. NW Washington, DC 20433 www.worldbank.org/ard