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Source of Funding

In: Business and Management

Submitted By ahmedelbadawy
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Funding is the act of providing resources, usually in form of money (financing), or other values such as effort or time (sweat equity), for a project, a person, a business or any other private or public institutions. The process of soliciting and gathering fund is known as fundraising.
Sources of funding include credit, donations, grants, savings, subsidies, taxes, Fundings such as donations, subsidies and grants that have no direct requirement for return of investment are described as "soft funding" or "crowd funding". Funding that facilitates the exchange of equity ownership in a company for capital investment via an online funding portal as per the Jumpstart Our Business Startups Act (alternately, the "JOBS Act of 2012") (U.S.) is known as "hyper funding".
Funds can be allocated for either short-term or long-term purposes.

Types of funds
Grants are made to non-profit organizations by development assistance agencies and foundations. Usually grants do not have to be repaid. Grant money is available to enhance country institutional capacity, to support governmental and non-governmental institutions and to finance project formulation, policy reform and sector management and development. Grants are provided by bilateral donors, multilateral grant aid institutions, United Nations organizations and specialized agencies, international financing institutions, international non-governmental organizations, the private sector, foundations and charity organizations.
Loans, unlike grants, have to be repaid. Loans can be obtained from most banks, but development assistance agencies may provide loans for development priorities at preferential rates of interest, with an initial interest free period, repayable over the long term. To justify a loan a strong business case must be made. Loans are made to borrowing countries that are further up the development ladder and to the private sector and development groups in all countries. Loans are made at near-to-commercial conditions reflecting the cost of resource mobilization on capital markets plus a small fund administration margin to cover a donor's operational costs. Interest rates are generally variable. Loans are generally repayable over 15 to 20 years and often include up to a five-year grace period. There are some interest-free loans but these carry an annual service charge and a commitment fee is usually applied. These loans are repayable over 25 to 50 years with a maximum ten-year grace period.
Equity investments enable persons and institutions to invest in shareholding of a company managing or implementing a sustainable forest management project. The investment may make an enterprise viable or enable it to expand, while the new shareholder will benefit through shareholder voting rights and dividends on profits.
Co-funding is provided by some donor agencies to complement existing funding. Depending on the proposal, it may be possible to find an agency that provides the full cost of a project proposal. However, it is frequently the case that funding is only available on the basis of shared cost. It may be necessary, therefore, to identify perhaps as much as 50% of the project cost from other sources of funding. If an agency requires co-funding, it is important to include a co-funding component in the project proposal. To secure co-funding it is necessary to identify existing matching funds. Complementary projects being formulated by other groups may provide possible sources of co-funding.

Domestic Funding
Domestic funding is one of forestry's primary sources of funds and may come from both public and private sources. Governments may raise funds from the private sector through royalties and taxes and reinvest them in forest management through public institutions, enterprises on state-owned land, or in support to the private sector. It is frequently difficult to classify funding from the public sector as it is expended on a broad range of activities, both structural and operational, and is implicit through activities such as incentive/disincentive regimes, policy reform, institutional development and strategic planning.
It can be argued that to be truly sustainable SFM should not require any external funding and in an ideal policy environment, this may be the case. However, it is more often true that revenue generated by government through forestry activities, weather public or private, is not reinvested into forest management, but leaks out to other sectors of the economy because the revenues are controlled by the treasury rather than forest departments.
Public financing capacity constraints mean that the role of the public sector in SFM may be limited. However, the public sector has a fundamental role to play in providing a conducive policy and operational environment to foster SFM.
Private domestic investments are made at all levels from forest dwellers to large industrial operations, although the investments of small enterprises and farmers are often overlooked. Private investments are limited by productivity, profitability and the local legal framework. Again, the local policy environment is crucial in providing incentives for investment by both small and large private enterprises and farmers.
SFM requires bringing together both public and private investments in a conducive policy environment that provides the right incentives for investment. Providing this investment environment is firmly in the domestic realm but, where appropriate, should attract external funding to assist in its achievement.

Official Development Assistance (ODA)
ODA typically supports capacity building, technology improvement, infrastructure development, environmental conservation and the removal of structural barriers, as well as providing technical assistance and other resources to catalyse development. Donors and multilateral agencies each have their own ODA priorities and strategies, in terms of regional and sector foci and types of intervention. Historically donor priorities have not necessarily matched those of recipient countries, which have resulted in a low ODA efficiency. For a discussion of these issues, please refer to the section that covers trends in ODA and the changing priorities of ODA that are currently taking place.
ODA flows are generally in the form of debt, grant, or technical assistance and have two main channels:
i) bilaterally from the donor agency to the recipient; or ii) multilaterally through international agencies which raise their resources from donor agencies and international financial markets.
Various specialized bodies including public institutions, private companies, NGOs and Private Voluntary Organisations carry out the development activities on behalf of the agencies and recipients. Some twenty bilateral donor countries and thirteen multilateral agencies are involved in providing ODA for forestry. Summaries and contact details of these agencies can be found in these pages.

Bilateral Donors
Bilateral funds are mainly channelled through special assistance agencies in the donor countries. Additional official assistance is channelled from donor to recipient countries through multilateral organizations and through international NGOs. In the 1990s, bilateral assistance represented approximately 60% of total aid, 81% of the total aid being in the form of grants.
Some bilateral donors have a regional focus whilst others prefer regional networks, for example SADC, ASEAN and CARICOM. The interest of some donors is also confined to specific aspects of forestry. This regional and subject focus means that some countries/regions may receive limited amounts of assistance compared to others.
Increasingly donor policies on forests are concentrating on the globalization of forestry and increased awareness of social and environmental issues.
The table below provides contact details of the major bilateral donor organizations.
Country WWW Link
Australia Australian Agency for International Development (AusAID)

Austria Austrian Development Cooperation

Belgium Directorate-General for Development Cooperation

Canada Canadian International Development Agency - CIDA

Denmark Danish International Development Assistance - DANIDA

Finland Department for International Development Co-operation

France Agence française de développement - AFD
French Development Agency - AFD

Germany Federal Department of Economic Co-operation and Development - BMZ
Deutsche Gesellschaft fur Technische Zusammenarbeit (GTZ)

Ireland Department of Foreign Affairs - Irish Aid

Italy Ministry of Foreign Affairs Development Cooperation

Japan Ministry of Foreign Affairs
Official Development Assistance
Japan Bank for International Cooperation - Japanese
Japan Bank for International Cooperation - English

Luxemburg Lux-Development - French
Lux-Development - English

New Zealand New Zealand: Ministry of Foreign Affairs and Trade

Norway Norwegian Agency for Development Cooperation - Norad

Portugal Institutoda Cooperação Portuguesa
Portugal: Ministério dos Negócios Estrangeiros

Spain Agencia Española de Cooperación Internacional

Sweden Swedish International Development Cooperation Agency

Switzerland Swiss Association for International Cooperation - Helvetas

UK UK Department for International Development - (DfID)

USA US Agency for International Development - USAID

Multilateral Donors
Multilateral assistance is provided by multilateral development banks (MDBs), UN Agencies and specialised organizations and international NGOs. These organizations channel multilateral funds that may have their origins from many sources.
Multilateral donor policy on forests has shifted from pure forestry to more integrated projects with forestry and forest management forming components of broader rural development and environmental management projects. In recent times, MDBs' forest policies and in particular that of the World Bank have changed, not only towards a more integrated approach, but also in the light of the "conservation vs. sustainable use" debate. In the early 1990s, the World Bank policy prevented investment in projects that included logging primary tropical forests for timber production. It has been argued that outside of protected areas that this has created a policy vacuum that addresses neither conservation nor sustainable use objectives. Bank's policy has now changed. This example illustrates the complexity of the ODA policy issues.
Whilst the World Bank is the largest source of multilateral funds, its involvement in the forest sector is limited, accounting for only 2 per cent of its lending. The regional MDBs, such as the African Development Bank, the Asian Development Bank, the Inter-American Development Bank and the European Bank of Reconstruction and Development, all have their own forest policies and make investments in the forest sector.
Section on multilateral development banks provides web sites of these banks and further details on how to approach them for project funding.

Multilateral donors
Multilateral assistance is provided by multilateral development banks (MDBs), UN agencies and specialized organizations and international non-governmental organizations (NGOs).
Multilateral donor policy on forests has shifted from pure forestry to more integrated projects with forestry and forest management forming components of broader rural development and environmental management projects. In recent times, MDB forest policies and in particular those of the World Bank have changed, not only towards a more integrated approach, but also in the light of the 'conservation versus sustainable use' debate. In the early 1990s, the World Bank policy prevented investment in projects that included logging primary tropical forests for timber production. It has been argued that outside of protected areas, this has created a policy vacuum that addresses neither conservation nor sustainable use objectives.
While the World Bank is the largest source of multilateral funds, its involvement in the forest sector is limited, accounting for only 2% of its lending. The regional MDBs, such as the African Development Bank, the Asian Development Bank, the Inter-American Development Bank and the European Bank of Reconstruction and Development, all have individual forest policies and make investments in the forestry sector.
Development banks
Financial assistance for forestry activities is provided by a number of development banks. The links below provide summary information, including the contact details, of some of the major banks.
African Development Bank (AfDB)

Asian Development Bank (AsDB)

Bank of Central African States (BEAC)

Caribbean Development Bank (CDB)

Central American Bank of Economic Integration (CABEI)

East African Development Bank (EADB)

European Investment Bank (EIB)

International Fund for Agricultural Development (IFAD)

Inter-American Development Bank (IDB)

West African Development Bank (WADB)

World Bank (WB)

There are also many subregional and national development banks.The Directory of Economic, Commodity and Development Organizations of the International Monetary Fund (IMF) is a useful reference.
Development agencies
Technical assistance in forestry is provided by a number of international agencies including:
Food and Agriculture Organization of the United Nations (FAO)

International Tropical Timber Organization (ITTO)

United Nations Development Programme (UNDP)

United Nations Environment Programme (UNEP)

United Nations Industrial Development Organization (UNIDO)

World Food Programme (WFP)

International Agencies
Technical assistance in forestry is provided by a number of International Agencies including:
Food and Agriculture Organisation (FAO)
International Tropical Timber Organisation (ITTO)
United Nations Development Programme (UNDP)
United Nations Environment Programme (UNEP)
United Nations Industrial Development Organisation (UNIDO)
World Food Programme (WFP)
Of these agencies UNDP, UNEP and the World Bank, manage the Global Environment Facility (GEF). The GEF is covered in the Special Mechanisms pages of the Sourcebook.

Non-governmental Assistance Agencies
A large number of non-governmental organisations provide support to SFM in specific fields, based on funds raised from public and private sources.
The World Conservation Union -IUCN
World Wide Fund for Nature -WWF
International Union of Forest Research Organizations -
IUFRO
International Centre for Integrated Mountain Development -
ICIMOD
Tropical Agricultural Research and Higher Education Centre -CATIE
International Association for Mediterranean Forests -AIFM
Centre for International Forestry Research -CIFOR
The World Agroforestry Centre -ICRAF
Each of these bodies has their own priorities and programmes, usually designed based on the needs of targeted recipients and the comparative advantages of these bodies. Their role is often research-oriented.

South-South Cooperation
Flows of Official Development Assistance (ODA) are often couched in terms of donor and recipient countries with the implicit assumption that donors are Northern countries and recipients are Southern countries. Whilst the major financial flows are indeed from North to South this view ignores the fact that Southern countries cooperate with other Southern countries through financial, technical, intellectual and personnel exchanges. Southern countries that have common problems may seek to find common solutions and to exchange ideas and experiences to achieve common goals.
There are numerous examples of South-South cooperation in relation to SFM and it is a form of cooperation that holds promise in achieving common goals. The recent developments in trans-boundary protected areas and the emphasis on international collaboration in African forestry research by organizations, such as African Forestry Research Network (AFORNET), attest to this.
An other example of coordinated South-South Cooperation, of direct relevance to SFM, is the UNESCO South-South Cooperation Programme's "Environmentally Sound Socio-Economic Development in the Humid Tropics". This programme uses the UNESCO Man and the Biosphere Programme (MAB) biosphere reserves as the basis of a cooperation programme to strengthen the reserve network in Latin America, Africa and Asia. The MAB programme seeks to strengthen the MAB biosphere reserves through the rehabilitation of degraded lands and improved agroforestry, forest ecology and sustainable land use.
Further information on the MAB South-South Cooperation programme can be found on theUNESCO website
Foundations
Philanthropic foundations offer grants and loans for a very wide range of purposes and applications. Frequently foundations have been established by wealthy individuals, families or companies that seek, over the long term, to put something back to civil society in the form of good works, often in specific areas such as health, education and environment. Few foundations specifically target forests and SFM, but these topics are often accommodated under more general environment headings.
There is a staggering number of foundations and, undoubtedly, there are very substantial sums of money available - if only you can find the right foundation and get to the front of the queue. Foundations exist in many part of the world and often there are national registers listing their contact and eligibility details. The United States, for example, had some 57,000 foundations in 2002, and a number of organizations specialize in providing summary information and advice on how to tap into these funds. Some other countries, such as Switzerland and Sweden, also have very large numbers of foundations, but it is not clear the extent to which these are generally philanthropic and can be approached for SFM funding.
The Sourcebook database on funding sources contains details of many foundations that have been identified as being potential sources of funds for SFM. Some of these foundations have very specific subject or geographic focus, whereas others have a more general international remit.
A number of on-line resources exist to help in both locating the right foundation and how to approach it for funding. These are generally North American focused but provide valuable reference points. Useful examples are:
Council on Foundations

Foundation Center
Whilst large funds are available to be tapped, competition to access them can be fierce. Indeed, some foundations do not actively solicit proposals and have closed procedures for developing projects.
Please refer to the Trends section for a discussion on trends in foundation funding.
If you have information on appropriate foundations that are not yet in the Sourcebook funding database please share it with us.
Refrences
The contents of these pages are derived from the following sources:
The web sites and annual reports of the various multilateral development banks were used as sources to update the institutional summaries in Blanchez and Fantinet, 1997.
Blanchez, J.,L., Fantinet M., 1997, Funding for Forestry Development, FAO Forestry Department, Forest Policy and Planning Division.
Regulation No 2494/2000 of the European Parliament and the Council of 7 November 2000 on measures to promote the conservation and sustainable management of tropical forests and other forests in developing countries.
UNESCO, Man and the Biosphere South-South Cooperation.
Helmut K. Anheier (Ed), 1999, Private Funds, Public Purpose: Philanthropic Foundations in International Perspective, Kluwer Academic / Plenum Publishers; ISBN: 0306459477

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Proposal of a Global Microfinance Financial Authority Mechanism

...Vehicle Keywords: microfinance, funding, inefficiency, coordination, FX risk, guarantee, credit bureau Abstract It is expected that microfinance services at present affect more than 533 millions of people, including the families of the clients.[1] A third of the capital needs is satisfied with international funding. Despite the fact that almost two hundred million people depend on international capital sources, channelled through local MFIs and number of the sources is likely to double within the next ten years, transactions happen in an environment without coordination and lack central authority, which would prevent wastage of idle potentials of economies of scale. More so, the international funding is burdened with serious obstacles such as concentration of investment on few regions and institutions, FX risk endangering the local debtors and lack of information sharing between the sources, leading to duplicities and inefficiencies. The goal of this paper is to quantify the annual financial losses incurred due to lack of coordination and to propose the founding of Global Microfinance Financing Authority (GMFA), a which would face the aforementioned challenges through innovative instruments. According to estimates of this study, forming of the proposed body would prevent substantial annual losses, today absorbed by the clients, raising the cost of capital for the poor entrepreneurs. 1. Introduction Funding...

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