Sahel – Call for proposals – LuxAid Challenge Fund

Which enterprises are eligible for the LuxAid Challenge Fund?

All commercial enterprises recognized as such by the law of the applicant’s country are eligible. This includes entities such as a SUARL (single-member limited liability company), SARL (limited liability company), SASU (single-member simplified joint-stock company), etc.

However, sole proprietorships not registered as single-member companies, economic interest groupings (GIEs), associations, and NGOs are not eligible.

Can we form a consortium of enterprises to submit an application?

The LuxAid Challenge Fund requires the applicant to be a commercial entity that meets all criteria. However, proposals from or involving a consortium are allowed.

Is an enterprise registered before January 1, 2019, but with activities related to food security or distance learning that truly began between January 1, 2019, and January 1, 2023, eligible?

If the company was legally registered before January 1, 2019, it will not be eligible.

Is a business offering a B2B model eligible (targeting other businesses or governmental entities, for instance)?

Yes, if the business also meets the other eligibility criteria.

Is a general service and trade enterprise eligible?

Yes, all commercial entities that also meet the other eligibility criteria are eligible.

Are R&D projects eligible?

The solution proposed by the enterprise must have been market-tested, generating commercial revenue for the business for at least the past 3 months. If the project meets this and other criteria, it will be eligible.

Is a business established outside Africa but also operating in one of the 3 countries eligible?

If it hasn’t been officially registered in Burkina Faso, Mali, or Senegal between January 1, 2019, and January 1, 2023, it won’t be eligible.

Is a business with previous experience in one of the three countries but starting its operations in one of the other two countries eligible?

If the enterprise can prove it was legally registered in one of the 3 countries between January 1, 2019, and January 1, 2023, it will be eligible.

Is a project implemented outside of these 3 countries eligible?

The project must be implemented and have a measurable impact in at least one of the 3 countries (Burkina Faso, Mali, Senegal). On the submission platform, the candidate will need to choose one of the three countries for their application, ideally where the enterprise’s headquarters is based or where the activity is most developed.

Is a business with employees under service contracts eligible?

The rule is that the enterprise must employ at least 2 employees with an employment contract. If a team member is engaged with a service contract but is fully employed by the enterprise and this can be demonstrated through the contract or otherwise, then they are counted as an employee of the enterprise. However, if the enterprise receives co-funding from the LuxAid Challenge Fund, it will commit to supporting stable employment and will therefore strive to offer an employment contract within the structure as soon as possible, following Responsible Business Conduct (RBC) principles.

Are written employment contracts mandatory? Are orally agreed contracts accepted?

To be considered an employee of the enterprise, it is necessary to prove the legal existence of an employment contract compliant with national legislation, therefore a written contract is mandatory.

Why this target for the LuxAid Challenge Fund?

This initiative targets the “missing middle” or “pioneer gap”. It’s aimed at innovative start-ups with a validated Minimum Viable Product (MVP) and initial commercial revenues. These businesses have financing needs that are too large for microfinance institutions, yet too small and risky for other private investors. In some markets, the investment ecosystem, especially the venture capital market, isn’t mature enough, leaving a gap in the entrepreneurial landscape and hindering the growth of high-impact potential businesses, creating a vicious cycle.

The LuxAid Challenge Fund’s intervention in this specific segment aligns with the central role of development cooperation by providing significant additionality: without this support, projects might not achieve these results, or not at this scale, or not as quickly. These businesses likely won’t be profitable for 2 to 3 years, but they must have a clear commercial and financial plan for achieving viability. Additionally, they need to have a clear theory of change and a monitoring framework for their solution, or be willing to develop one, and strive to improve their responsible business conduct.

Are there any exclusion criteria?

Yes, the candidate must be able to guarantee that:

• The enterprise is neither responsible nor involved in environmental degradation, human rights violations, forced labor, or child labor.
• The enterprise is not subject to ongoing criminal proceedings related to fraud, corruption, money laundering, terrorism, human trafficking, and does not practice discrimination based on race, color, age, sex, gender identity and expression, ethnicity or national origin, disability, pregnancy, religion, political affiliation, union membership, veteran status, protected genetic information, or marital status in hiring and employment practices, such as wages, promotions, rewards, and access to training.
• The enterprise is not subject to sanctions from the European Union (EU), and its representatives (owners or executives) are not on the EU sanctions list.
• The enterprise does not operate (directly or indirectly, through related companies) in the following sectors: arms, mining, alcohol, gambling, tobacco, pornography, extractive industries, and non-renewable energy.

How do you define the futureproof criterion?

For the LuxAid Challenge Fund, futureproofing refers to adapting to future risks and trends, such as climate change, land degradation, shifts in consumption patterns, and Industry 4.0.

By assessing the overall potential impact of the project—both positive and negative, short and long term—the project should be economically, socially, and ecologically sustainable and forward-looking regarding major global risks, threats, and trends. For instance, does the project’s analysis consider the risks, impacts, and opportunities that megatrends like climate change and the fourth industrial revolution might have on its profitability analysis?

How do you define innovation? Must the product or service be innovative?

For the LuxAid Challenge Fund, innovation is a new solution with the transformative capacity to accelerate impact. It involves creating, finding, adapting, and applying new ideas, approaches, products, services, or methods to address existing problems or meet unmet needs. Innovation isn’t limited to creating something entirely new; it also encompasses significant and creative modifications to existing solutions or their application in a new context. Additionally, innovation may provide a solution that previously had no local demand because it was unknown but meets a real need in terms of impact. To be considered “innovative,” the solution must be distinct enough from other products, services, or approaches already present in the market in the relevant country. This could manifest as differences in product/service design features to better meet needs, distribution models, target customer segments (such as providing new products or services to previously underserved populations), economic models (who pays and who benefits, pricing), and the resilience of the product or service (anticipating future developments).

How do you define additionality?

In the context of the LuxAid Challenge Fund, additionality means a positive contribution that would not have occurred without co-financing and generally characterizes projects taking bold risks to provide innovative and impactful solutions. To assess additionality, selection committees will analyze:

• The extent to which the enterprise cannot self-finance the project (within a reasonable timeframe) or access equivalent support from a commercial investor;
• The extent to which the project’s results would not have occurred without co-financing, are of greater scope, higher quality, or progress more rapidly;
• The potential of the project to stimulate model replication or systemic change in this market or industry.

Who is part of the selection committees?

Applications will be evaluated by a national selection committee consisting of 3 or 5 members representing LuxDev’s office and the Luxembourg Embassy in the country, an investment/private sector expert, and thematic/sectoral experts. Pre-selected applications following the due diligence process will then be evaluated by an international committee composed of 3 or 5 members representing LuxDev’s headquarters, the Ministry of Foreign and European Affairs, an investment/private sector expert, and thematic/sectoral experts. Non-voting members and observers may be invited to pitch sessions and deliberations of both committees, provided they sign a declaration of impartiality and confidentiality. The selection committees reserve the right to delegate application analysis to LuxDev and/or an external provider to pre-select the best applications, organize field visits, and conduct due diligence on each pre-selected project and company. Anyone involved or having access to documents provided by the candidates will sign a confidentiality agreement. Selection committee members will also sign a declaration of impartiality and absence of conflict of interest.

Can the minimum contribution of 30% be made up of assets (land, existing facilities, etc.) or is it strictly cash?

Existing assets cannot be considered as part of the personal contribution. However, if the entrepreneur makes a personal donation of a property or equipment that is necessary for the project’s implementation, it represents a new resource invested and therefore can count towards the personal contribution.

Can you combine a grant from Luxembourg cooperation with co-financing from the LuxAid Challenge Fund?

It’s not possible to include another grant from Luxembourg cooperation in the resources provided by the applicant to finance the project proposed within the LuxAid Challenge Fund. However, grants from other cooperations for the same project can be included in the project’s resources (personal contribution).

If my project is selected, what can I expect in terms of co-financing payments?

Upon the signature of the agreement by both parties, an initial installment of 25% of the grant amount will be disbursed, subject to the lifting of any suspensive conditions. The payment of a second installment of 50% of the grant amount will be made based on a technical report demonstrating the achievement or progress in achieving the indicators and conditions, and a financial report justifying the expenses actually incurred corresponding to half of the total budget. The remaining balance of up to 25% will be disbursed based on a final technical and financial report demonstrating the project’s results and justifying the expenses actually incurred corresponding to the entire budget. The disbursement of the balance is capped at the expenses actually incurred.

Is the loan my enterprise took out for the construction of our factory included in the cumulative financing criteria for eligibility?

The EUR 300,000 in cumulative financing includes loans, so this loan is indeed part of the cumulative financing.

For personal contribution, does the EUR 300,000 limit for cumulative financing also apply to a subsidiary?

The EUR 300,000 limit for cumulative financing applies to the legal entity/business entity submitting the application.

Is the amount ranging from EUR 50,000 to EUR 140,000 to be shared among recipients or is only one winner selected for this competition? Is there a national allocation? How many projects will be selected in each country?

The LuxAid Challenge Fund has a budget of 1 million EUR to be shared among the best projects from the 3 countries (approximately 15 projects), with co-financing ranging from EUR 50,000 to EUR 140,000 per enterprise. There is no quota for projects per country. The best projects will be selected regardless of the country where the business is registered.

Will the co-financing need to be repaid?

The financial support provided by the LuxAid Challenge Fund is a non-refundable grant.

What types of expenses are eligible?

To be eligible and covered by the co-financing, expenses must meet all of the following criteria (not exhaustive):

• They must be necessary for the implementation of the action (economic activity), directly attributable to it, and resulting directly from its implementation.
• They must be borne by the enterprise, meaning they represent actual expenses genuinely and effectively incurred by the project promoter.
• They must be reasonable, justified, and consistent with the principles of sound financial management, as well as conform to the usual practices of the project promoter, regardless of the source of funding. Acquisition contracts must comply with usual procurement practices, provided that the contract is awarded to the offer providing the best value for money and that any conflict of interest is avoided.
• They must be due during the implementation period of the co-financed project, consistent with the scope and schedule of activities.
• They must be identifiable and supported by documentary evidence, particularly determined and recorded in accordance with the usual accounting practices of the productive project promoter.
• They must comply with the provisions of applicable tax and social legislation, taking into account any privileges and other benefits granted to the project promoter.

What is co-financing and are there rules to follow?

Co-financing is a direct financial contribution through a donation or non-commercial payment: It aims to encourage businesses to propose initiatives that achieve specific impact results in line with the objectives outlined in the call for proposals.

Key rules to follow:

1. Private sector initiatives: Co-financing is only possible when the initiative comes from the private sector, and the results of the funded action belong to the co-financing beneficiary.
2. Non-profit rule: on the one hand, co-financing cannot aim to generate a profit from the project and, on the other hand, creation of reserves through the project is not allowed. Any profit margins obtained from the co-financed project during its execution must be reinvested in project execution.
3. Double funding prohibition: Double funding of project costs is not allowed. Expenses for actions that occurred before the signing of a co-financing agreement are not eligible (principle of non-cumulative allocation and absence of double funding, as well as the principle of non-retroactivity).

In what currency will the co-financing be paid?

Selected companies will sign a co-financing agreement with LuxDev specifying the grant amount in euros, and payments will be made in EUR.

What are the ineligible expenses?

Ineligible expenses include costs incurred outside the project period indicated in the co-financing agreement, dividends paid by the company, debts and debt-related costs, interest rates, bank charges, and foreign exchange losses, as well as costs related to project development.

Can an enterprise that was not selected in this competition apply again in the future?

Yes, calls for proposals will be launched in different countries where Luxembourg Cooperation is active and in various sectors. A candidate not selected in the current competition can apply for future calls for proposals.

Should the enterprise team be distinguished from the enterprise founders?

Not necessarily. The founders of the business can also be current members of the enterprise’s team. Please specify in the role of each team member who is also a (co-)founder.

Could you provide more explanation on the notion of official financial statements?

Financial statements are accounting documents that provide information about a business’ financial position at a specific point in time. They include the balance sheet, income statement, cash flow statement, and statement of retained earnings/shareholders’ equity.

In the application form, should the “30: Financing Need” section be completed fully?

To ensure that all applications are properly evaluated, it is necessary to fill out all sections marked with an *.

In question 11 of the application form “Main Activity / Core Business of the Company”, should we present the parent company or the proposed project?

The question refers to the company itself.

Who should I contact in case of technical issues with the application platform?

For any technical issues, you can contact akram@vc4a.com.

Is there support available to fill out the application form? Can I discuss my application with LuxDev before submitting it?

We offer information sessions on the call for proposals in the form of webinars. The dates and registration links or recordings are available at the top of our homepage. Due to the large number of applications we receive, we will not be able to offer feedback on the relevance of your application. If you have a question about the application process or the criteria applied, before contacting us, we recommend carefully reading this FAQ to see if the answer to your question already exists. If not, you can address your questions to lcf@luxdev.lu. Any shared responses will then be included in this FAQ section. Pre-selected candidates will be contacted by LuxDev or an external provider to discuss their application. In different pre-selection phases, candidates will be offered free coaching sessions aimed at preparing for the pitch, or other aspects as identified needs, such as business plan review, improving the results chain, etc.

What is the recommended project duration?

The recommended project duration is 12 to 18 months, with a maximum of 24 months, starting from June 2024.

In which language should I submit the application form?

Applications must be written in French.

What is the intellectual property policy?

The company receiving co-financing from the LuxAid Challenge Fund retains full ownership of its innovation, as LuxDev acts under Official Development Assistance. As part of impact assessments conducted on co-financed interventions, LuxDev requires the publication of results and encourages openness and sharing of collected data and underlying analysis scripts.

I need more time to fill out the application form – can I submit later?

To ensure fairness, no applications will be considered outside of this process and timeline. Applications must be submitted within the deadlines via the online portal before January 8, 2024.

What is the response time after submitting an application to the LuxAid Challenge Fund?

As mentioned earlier, LuxDev commits to keeping you informed of the decision made within 6 months from the application deadline.

What processing is done by VC4A with the data I share on the application platform?

VC4A complies with the General Data Protection Regulation (GDPR). More details here: https://vc4a.com/privacy/

Is there an advantage for gender-sensitive companies (majority-owned by women, for example)?

We will pay attention to gender equality.

What is the “do no harm” selection approach?

To enable LuxDev to identify potential risks of implementing a solution and to develop, in collaboration with selected enterprises, mitigation strategies, pre-selected projects will be analyzed using the following warning criteria:

• Changes in habitats/ecosystems/forests (reduction, degradation, change) as well as any changes in aquatic resources;
• Introduction of invasive species;
• Land degradation;
• Production chains related to livestock, cocoa, coffee, palm oil, soy, wood, rubber, charcoal, and paper products;
• Increase in environmental pollution, especially hazardous waste, energy needs, and water resource use;
• Changes in land rights/access and community protection.

If my project is selected, what should I expect in terms of monitoring and reporting?

Enterprises receiving co-financing will be required to provide LuxDev with semi-annual technical and financial reports. These reports will focus on the results indicators and targets proposed by the enterprises in their application, agreed upon with LuxDev, and mentioned in the annexes of the co-financing contract. Achieving certain results will trigger disbursements of the co-financing. Following each report (semi-annual or final), the enterprise will be invited to participate in a brief meeting (virtual or on-site) with the LuxDev team and the Luxembourg Embassy in the country. To assess the results of selected projects and enhance learning, LuxDev reserves the right to request on-site visits conducted by its staff, as well as external evaluations. Based on the progress observed, LuxDev will select certain projects for which an external impact evaluation will be conducted.