Yes, the origins of the challenge fund model are to be found in the UK; a developed and industrialized country, very unlike Vietnam. But over the last decade the challenge fund model has been adapted and applied in numerous developing countries across the globe.

Here in East Asia, there have been virtually no challenge funds until very recently, and this is the first time that a challenge fund has been designed to operate in just a single country, rather than a wider region. So, to be very honest, I cannot claim that we absolutely “know” it will work in Vietnam.

But we do believe that Vietnam’s current economic conditions provide a very promising environment in which to attempt the challenge fund model, and we do have high expectations for the Vietnam Challenge Fund.

The ingenuity and innovation already shown by companies and entrepreneurs means that we strongly believe Vietnam is host to many good business ideas, and what we want to do with the Fund is help those ideas become reality. We also recognize that successful businesspeople in Vietnam are often keen to share their good fortune with people that have not been so successful and remain in poverty. So we feel some of the key ingredients exist for a challenge fund approach to be successfully adopted in Vietnam.

How is the fund different from others available in Vietnam?

I am very glad you asked me this question. The Vietnam Challenge Fund is a very different instrument than virtually all other funds in Vietnam. The first thing to stress is that the Fund is focused on one goal: to help improve the incomes of the poor in Vietnam. Everything we aim to do, and the way we do it, is based on trying to achieve that goal.

Let me be very clear. The Vietnam Challenge Fund does not give out loans. The Fund also does not invest in the shares of enterprises. What we do instead is provide grant funding to innovative business projects that should help improve the incomes of poor people. Those business projects are based on ideas that enterprises have developed, and if we agree that the project has a good chance of success, then we will finance up to 49 percent of the project’s anticipated costs. The enterprise proposing the idea must finance the remaining 51 percent or more of the project’s costs. It is important that applicants not only submit innovative ideas for projects, but also demonstrate their ability to actually implement the project they propose effectively.

We are also not interested in helping fund business projects that would easily get a bank loan or some other kind of finance from the normal market. Rather, we are looking for projects that are relatively risky, and so would struggle to get normal financing. We want to help share the risk of pursuing a project that is innovative, and if successful will improve the incomes of as many poor people as possible. We are in the market for good ideas, and what we offer is a willingness to share in the financial risk of turning those good ideas into reality. But we do not get involved in the management of projects we support.