To overcome the systemic lack of capital in many developing markets and enhance innovation, CSR Fonder uses Challenge Funds to finance entrepreneurs that have a strong commitment to drive sustainable development.
Because of low investment, many people living in poverty suffer a lack of productive work and goods that would help them improve their livelihoods. The private sector is a large source of innovation, employment and growth that has the potential to positively affect the situation for people in low- and middle-income countries. Due to the high level of uncertainty and risk associated with developing markets it is often hard for entrepreneurs to access credit or investments.
CSR Funds are mostly aimed at entrepreneurs that lack the capital to start up their business or to scale a small project or business venture into a larger one. CSR Funds wants to give social/sustainable businesses a chance to try their ideas and innovations. By taking some of the initial risk via investments through a fund, CSR Funds can enable social/sustainable businesses to become self-sustaining.
A CSR Funds is aimed at small sustainable enterprises that are just starting out or that want to expand to a new market. Focus is often placed upon the innovative aspects of a sustainable and responsible business idea; for example, introducing a new technology in a market that enables higher productivity or more environmentally sustainable production.
From CSR Fund’s perspective one of the reasons for working with CSR Funds is to discover innovative and unconventional solutions to development issues. A CSR Funds therefore accepts a higher level of risk in investment than most other investors would.
Most CSR Funds announce a “New Investing Project” where entrepreneurs can apply for funding. Applicants must have a business that has positive impact on sustainable development. The entrepreneurs that have applied are assessed against each other and the businesses that best fills a number of pre-set criteria are given a grant to implement their ideas. While applicants usually have to adhere to certain criteria, they are given freedom in designing their solutions.