Grants are the most preferred aid instrument in international development. They are the type of financial assistance awarded to beneficiaries by various donors for specific purposes. During the last decades, the types and forms of grants have evolved considerably, from offering land rights to Official Development Assistance (ODA) grants, thus expanding the conceptual boundaries. Currently, there is no commonly agreed definition of grants nor a universal categorization of their forms and types. Nonetheless, following scrupulous analysis, DevelopmentAid has created a general overview of the types of grants based on three elements, namely the issuing authority, the purpose, and the type of beneficiary.
What are grants?
Grants are the type of financial assistance awarded to one or more beneficiaries to carry out an action or implement a development program with no obligation for repayment. Generally, grants are associated with the international development sector, representing tools that are designed to foster the socio-economic progress of low-income countries. The most significant aid donors, such as the EU for example, prefer socio-economic grants to other financing instruments.
Nonetheless, sometimes grants are also used in academic and private sector contexts. The outcome generated by the grant is usually transferred into the ownership of the beneficiary. It is worth mentioning that bilateral donors such as governments or their executive agencies (e.g., USAID) are the largest providers of grants in the settings of international development and the cooptation sector. In 2020, for example, 78% (US$125.6 billion) of the gross bilateral ODA provided by Development Assistance Committee (DAC) members constituted grants while only 22% (US$35.4 billion) took the form of non-grants (loans and equity investments).
Types of grants
Over the last few decades, the types and forms of grants have evolved considerably. As a result, the conceptual boundaries and the associated definitions have expanded but the main principles have remained the same. The early types of grants were outright donations awarded by state/federal governments to assist the local performance of a certain function, i.e., education, in which a national interest existed. Modern types of grants represent forms of financial assistance granted to a broader range of beneficiaries such as developing countries, organizations, individuals, or civil society entities to support education, research, or sustainable socio-economic development.
Currently, grants can be grouped based on multiple factors such as the issuing authority, the purpose, and the type of beneficiary. This categorization will be used for the purposes of this article.
Types of grants by issuing authority
- Official Development Assistance (ODA) grants refer to the type of financial assistance provided by international donor organizations (e.g., bilateral or multilateral donors, development financial institutions) to support the socio-economic progress of developing countries.
- Federal/Government grants are the form of financial assistance awarded by federal, state, or local government authorities to one or more beneficiaries to act for the public benefit.
- Institutional grants are financial awards usually offered by educational institutions such as universities, colleges, or private schools with the purpose of assisting promising or disadvantaged students to afford the cost of obtaining a degree.
- Private foundations grants are financial assistance awards provided by private foundations that pursue charitable purposes (e.g., Bill & Melinda Gates Foundation, Red Cross) to promote or implement a collective, public or social cause.
Types of grants by purpose
- International development grants are financial contributions from donor organizations to one or more beneficiaries within the boundaries of the international development sector with the purpose of supporting the world’s most vulnerable communities. These relate to ODA funding.
- Research and innovation grants are financial assistance tools designed to support research and innovation (R&I) efforts within the educational and private sector spheres. Horizon Europe, the seven-year pan-European scientific research initiative is a good example of such grants.
- Educational grants (scholarships) are offered by governments, institutions (e.g., universities), or private actors (e.g., family funds) to mitigate the cost of higher education for promising or disadvantaged students.
- Grants for economic support are part of local, national, or transnational funding schemes designed to provide short-term support for the unemployed, employed, self-employed, and companies in times of crisis. The coronavirus assistance programs implemented recently by the German Government are good examples.
- Grants for fostering civic participation are part of specific funding programs that aim to protect human rights and foster civic participation. In the EU such grants contribute to sustaining and developing open, rights-based, democratic, equal, and inclusive societies based on the rule of law.
- Awareness-raising grants refer to funding for projects and programs designed to disseminate knowledge, social issues, or best practices.
- Skills development grants are offered to individuals or organizations for innovative projects that address challenges to hiring, training, or retaining workers.
Types of grants by beneficiaries
- Grants for countries/governments are financial resources provided to developing countries free of interest and with no provision for repayment and are usually part of a development program.
- Grants for non-profits represent the financial support provided to non-profits by corporations, foundation, or governments for promoting or implementing various social causes.
- Grants for the private sector refer to financial support for the private sector often allocated in times of crisis or for research/innovation purposes.
- Grants for civil society are forms of financial assistance designed to support civil society and grassroots initiatives.
- Grants for individuals are designed to provide financial support to individuals with education, business, household, or health expenses.
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