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In rural development today, there is much more reliance on the market than in past decades. In many countries, governments have new roles, and no longer sell outputs and inputs, or deliver credit. Instead, they are supposed to help the private sector develop.

The are still frequent complaints that markets are not developing, or that they are not delivering enough volume or value of good and services. Questions of what to do to reduce poverty, increase employment and widen consumer choice are still to be answered. to deal with problems of inadequate markets and the persistence of deep poverty, development agency personnel designing projects have increasingly turned to grants to provide solutions.

This note examines the theory of grants, draw lessons from a review of their use in twelve projects that started mostly in the year 1998-2000, discusses findings, and recommends ways to deal with problems faced in grant projects.