Driving innovation for impact in Costa Rica

Development cooperation seeks to support innovative business cases for greater impact   

For decades, development cooperation has largely focused on strengthening public institutions and supporting civil society through public programs, technical assistance, and social projects. These approaches were—and remain—fundamental pillars of international cooperation. However, given today’s mounting financial needs and the complexity of overlapping global crises, they are no longer sufficient on their own. Addressing challenges such as climate change, food security, financial inclusion, productivity, and decent job creation now requires the active involvement of the private sector. Collaboration with private economic actors has become indispensable for mobilizing the scale of resources, innovation, and solutions needed to achieve shared development goals.  

Indeed, these challenges cannot be solved by the public sector alone. They require innovation, scalability, and solutions that work in the market. For this reason, development cooperation is also evolving: it is no longer just about transferring resources, but about mobilizing capabilities, sharing risks, and accompanying the private sector when its solutions are ready to grow.  

It is within this context that the LuxAid Challenge Fund, recently launched in Costa Rica, finds its place. Its logic is clear and uncommon: not to finance ideas, but to scale already validated solutions. The fund targets companies that are already commercializing a product or service, that have demonstrated market traction, but that face one of the most challenging stages of the business cycle: the moment of consolidating before being able to scale.

In Costa Rica, this gap is well known. There are instruments for ideation, prototyping, and seed capital, as well as more mature financing options. What has historically been missing is a mechanism to support that intermediate stage, when companies are not yet eligible for traditional credit and investors but need resources and partnerships to consolidate and grow.  

The LuxAid Challenge Fund aims precisely to close that gap by combining co-financing, a long-term vision, and clear impact criteria. This is not about assistential subsidies, but about a modern form of cooperation that recognizes the private sector as a central actor in development cooperation and supports solutions that are both economically viable and socially relevant.  

This approach responds to an unavoidable reality: public resources are limited and challenges are systemic. Innovation is increasingly happening outside the State. Cooperation that fails to integrate the private sector risks losing relevance.  

It is no coincidence that Costa Rica was selected as a focal country for this call. The country combines institutional stability, human talent, and a dynamic entrepreneurial ecosystem, particularly in sectors such as Agritech and Fintech, where innovation can directly translate into greater productivity, inclusion, and sustainability.  

In agriculture, technology enables more efficient water use, reduced losses, and stronger value chains. In financial services, digitalization expands access to all communities, everywhere, lowers costs, and improves transparency. In both cases, social and economic impact is tangible and measurable.  

This emphasis on impact measurement is one of the fund’s defining characteristics. Innovation is not understood as novelty, but as the ability to generate verifiable change: more employment, greater efficiency, better access to services, and a smaller environmental footprint. Development cooperation moves away from rhetoric and toward results.  

Another key element is risk sharing. By co-funding projects together with companies, the fund acknowledges that innovation involves uncertainty, but that shared risk is a necessary condition to transform validated ideas into sustainable solutions. Without risk, there is no scaling; without scaling, there is no impact.  

From a country perspective, instruments like this send a clear message: Costa Rica is not merely a recipient of development cooperation, but a reliable partner for innovative development models. A country capable of articulating the public sector, the private sector, and international cooperation around shared objectives.  

The debate is no longer whether development cooperation should involve the private sector. That question has already been answered. The key issue today is how to do it well, with clear criteria, transparency, and measurable results. The LuxAid Challenge Fund offers a concrete response to that “how.”  

In a global context marked by uncertainty, investing in solutions that already work, in companies that already generate value, and in models that combine innovation, sustainability, and impact is not merely a technical decision. It is a strategic one.  

The development cooperation of the future will not be measured by how many projects it finances, but by how many solutions it manages to scale, how many end-users see their lives improved. And along that path, Costa Rica has a clear opportunity to demonstrate that development is also built through entrepreneurship, innovation, and intelligent cross-sector collaboration.