By Luca Crudeli, DAI
This blog post originally appeared on the BEAM Exchange on February 26, 2017
Operating in a donor intensive environment can limit the effectiveness of our programmes when implementing partners and clients (the donors) face conflicting incentives. How can practitioners best manage the situation?
Practitioners often find themselves operating in environments that are saturated with development initiatives, and that receive support from a number of different external agents. Sometimes we work with beneficiaries (“partners" in M4P jargon) or with programmes that have similar goals and objectives to ours, or even on programmes that are managed by the same implementing agencies and on behalf of the same clients, but with which we struggle to collaborate.
In this blog I will share my insights on how practitioners can best work with others by focusing on three different scenarios, one of high official development assistance (ODA), one with competing market system development (MSD) programmes, and one where donor support comes in a politically charged environment. I hope these three ideal-types can be the starting point of a structured discussion on how to better implement a programme in a donor-intensive environment.
I have been fortunate to work in various countries where the challenges of donor coordination have been of different types. This includes Tanzania in the early 2000s, when the country was the darling of development and almost every agency was present; and Nigeria, where DFID increased programme funding from £35 million in 2003–04 to £120 million in 2009–10 with the consequent increased pressure to spend. I have also worked in Zimbabwe, where the development space is dominated by political pressure, and the need for donors to (or not to) put their face, and flag on the things they do; and in the Solomon Islands where Australia’s long-term presence has created different types of political pressure. I am now in Mozambique, which is on the verge of a major financial crisis, and where bilateral partners seem to prioritise direct support, in order, it seems, to gain political influence to protect current and future investments in the country’s nascent gas industry.
Three scenarios will be reviewed that show how concentrated donor activity constitutes a tangible environmental variable for a market systems development programme to consider and manage. These scenarios are:
1. The country receives a significant amount of aid, both in monetary terms and in terms of the number of donors present – i.e. intense donor presence;
2. The country has a significant number of MSD programmes operating, and possibly competing with each other – i.e. high density of MSD programmes;
3. The political relationships between the donors and the recipient country are complex – i.e. charged political environment.
I will unpack each of these scenarios based on the effects that it has on the prevailing incentives driving three distinct sets of stakeholders:
1. Donor agencies (usually the “clients” for practitioners);
2. Implementing agencies (often the consulting firm which wins the bid to implement a project);
3. Partners or beneficiaries.
The scenarios below are simplified for the purposes of discussion. Reality is usually more complex, and the challenges outlined in each scenario may in fact overlap. For each scenario I propose some possible remedies. I welcome your comments on these.
Scenario 1. Intense donor presenceIn this case, “intensity" is measured in terms of number of donor agencies operating in the country, and the amount of ODA per capita spent on the country. A typical case is Tanzania, where, by 2007, ODA had climbed to about US$70 per person, compared to the sub-Saharan African average of less than US$50. A number of donors were very active in the country at that time (most still are), with the World Bank, DFID and the Scandinavian countries leading.
If you have worked in Tanzania, you may know that it is an environment where partners/beneficiaries can “shop around” for support, and where donors almost seem to compete with each other. One method used by donors to mitigate competition is to increase donor coordination. In practice, this sees donors pool funds together to resource joint projects. This has the benefit of improving coordination but also risks creating projects with large budgets, and complex reporting requirements (each contributing donor usually has specific reporting formats and timing). This approach can also mean that the strategic visions of the programmes are compromised and may therefore be weak.
My experience of this was in coordinating the Tanzania Private Sector Competitiveness Project, a World Bank project that pooled funding together with DFID, DANIDA, RNE, and SIDA. Joining resources resulted in a budget of over US$120 million, but also led to different opinions about how to achieve impact, and in particular about whether to build local capacity and institutions, or simply to push the government directly for policy change. Similar tensions are still experienced in Tanzania today, by the donors that are jointly supporting the SAGCOT initiative.
Donors' prevailing incentives
In this scenario the primary objective of donors is to manage a large pipeline and achieve expenditure targets. Donors therefore aim to have reports that show rapid progress, so that they can justify their ambitious expenditure plans. There is pressure to spend, but not necessarily pressure to raise the donor’s political profile through spending activities – which differs from the scenarios discussed below. Demonstrating attribution is important, but primarily for the purpose of justifying increased spending and the design and tender of new projects.
Implementers’ prevailing incentives
A country with an environment like this is obviously an attractive market for international implementers, given the volume of donor resources available. Consulting companies have a strong incentive to build a track record in the country, and to be as visible and high-profile as possible, to help gain future contracts. The consequent high level of competition among implementers can make it difficult for projects to collaborate with each other, particularly if they are implemented by competing firms.
The amount of foreign aid inflow creates a local aid industry, that supports a growing number of local consultants, but also a growing number of non-sustainable organisations. These include donor-funded business and civil society organisations, think-tanks and even private sector companies, all of which are dependent on the development industry.
More broadly, easy access to donor funds may nurture a sense of entitlement for handouts. When I was in Tanzania, for example, no government employee would perform activities pertaining to a donor-funded programme (even if these were part of regular government duties) unless they were paid by the programme (usually in the form of allowances). In the Niger Delta, a similar sense of entitlement is found among local communities and local small businesses, because CSR activities by oil companies have focused on the provision of handouts and direct funding, instead of more strategic forms of development. This is a paradigm the Chevron/PIND foundation has been trying to change for some time.
Managing donor reporting requirements can be challenging in this scenario. However, it is always important to fulfil this requirement in order to help the donor counterpart to be in a strong position to support the programme’s aims and to encourage the donor to be innovative and take some risks.
In terms of results that can be achieved in this scenario, innovation is more likely to happen at the margins, further away from those organisations that already gravitate towards established donor circles (i.e. are funded by donors). It is therefore important for programmes to continuously map the landscape to identify potential new partners. It can be worthwhile to go smaller, to take more risks on working with little known partners, and to focus more on pursuing innovation.
A programme’s strategic vision should factor in existing donors' funding initiatives and it may be a good idea to help partners become capable of capturing more of these resources. One area where I had success with this approach was in helping research organisations in Zimbabwe to monitor the funding market, understand the needs of funders, and to deliver quality products, thus becoming more influential in the policy space and raising more funding – a virtuous circle. To do this, however, it is important for a programme to have a distinct brand and to be recognised as counsellor and adviser, rather than as a funder.
One way for practitioners to manage concerted pressure from a donor to spend is to consider including some direct and “expensive” interventions in the programme’s portfolio that can bring about real disruptive change in the system. Examples include major policy change or an infrastructure project.
Scenario 2. High density of market systems development programmesThis scenario is one where there is a high concentration of MSD programmes in the country operated by the same or by different donor agencies.
When I was managing ENABLE in Nigeria, for example, five new M4P programmes (the Growth and Employment in States - GEMS suite of programmes) were added to two existing MSD programmes: PropCom and ENABLE. This meant that most of the beneficiaries that ENABLE was working with suddenly had more partners to choose from, which had the effect of weakening ENABLE’s leverage.
Donors' prevailing incentives
Unlike the previous scenario, pressure to spend is not the main constraint.
Where there is a high concentration of MSD projects, you can expect to find advisors who are keen to do good development work, promote innovation, and at the same time build their careers. However, since the turnover of donor staff is often faster than the lifespan of projects, friction may arise between the donor and the programme at some point. For example, the person who established the programme may need to show immediate impact to advance their career, or a new person may arrive who is not interested in, or does not understand the approach being used.
In this scenario, delivery and proof of attribution tend to be priorities, so that the programme brand can be quickly established and more easily defended.
Implementers’ prevailing incentives
It is fair to say that the “MSD/M4P club” is small. There is a limited number of firms and consultants that have built a name and track record of experience in this approach. The MSD approach was, at least initially, marketed by differentiating it from traditional, and distortive, supply-driven approaches. This means that competition among MSD practitioners can be fierce. As a result, rather than broadening the approach there has been a certain “hardening” with individuals and firms seeking to differentiate based on the purity of their approach, and a tendency towards less, rather than more, interaction and innovation among practitioners. In my view, this could weaken the approach over time, and I encourage all of us operating in this space to consider focusing on analysing challenges and learning, rather than simply presenting our programmes as “the way it should be done.” For example, it is evident that, with the MSD approach, attribution is difficult to determine. This often exacerbates competition among programmes rather than promoting shared learning which could assist both donors and beneficiaries.
I had experience of this in Nigeria, when managing ENABLE. ENABLE had been supporting the Nigerian fertiliser association for over a year to galvanise resources and embark on a collective effort to advocate for the government to stop subsidising the fertiliser market. On a parallel track PropCom had been working with leading fertiliser companies to understand and respond to existing market opportunities, through the introduction of innovation in product and distribution networks. The two programmes worked together to organise public events to discuss the fertiliser policy. However, when the government took the decision to stop the distribution of free fertiliser, the result was mostly attributed to PropCom. With little recognition for ENABLE, this consequently limited the opportunities for real learning and replication from the experience.
MSD programmes that operate in the same space (market/value chain, etc.) tend to identify and select the same partners/beneficiaries. This is because the approach requires projects to work with those partners that show real vision and drive to change, and to improve their own performance in the market. Programmes usually also require beneficiaries to be of sufficient size to effectively change how the market system works, and impact a large number of poor people. When markets are thin, however, the number of beneficiaries that fit these criteria are few, and programmes may find themselves competing with each other to work with the same partners. This is a serious challenge, and is exacerbated by the weak incentives that programmes have to collaborate with each other discussed above.
Partners, on the other hand, have a stronger incentive to default on agreements they may have with a particular programme, because the alternative of working with a competing MSD programme is always there. This reduces leverage significantly, with the consequence of making it harder for each programme to influence partners and achieve their objectives.
In this scenario, collaboration among programmes tends to depend on the quality of their leaders’ personal relationships. It is important to invest in building these relationships, though in a thin and highly competitive market this can be difficult, as incentives go against this.
From a strategic point, and in order to avoid conflict, it is important to broaden the search for partners, and to identify partners that other programmes may not be working with. This, of course, means taking more risks, since these, less prominent partners, may be more marginal players in the market.
Good communication with the donor/client is also important, in order to map what the different MSD programmes are doing, and to have a clear agreement on where to add value.
Scenario 3. Charged political environmentThis scenario is refers to increased “density” rather than intensity, however I feel it is one worth discussing in this context. I have come across this scenario twice in my professional career. Once in Zimbabwe, managing a DFID programme promoting policy reform (Zimbisa), and once in the Solomon Islands, helping DFAT move from the supply-driven approach under the auspices of the Regional Assistance Mission to Solomon Islands (RAMSI) to a market-led approach, with a new set of MSD programmes. In both contexts, the objective of managing bilateral relationships between the donor and recipient countries, superseded the developmental objectives of the programme.
Donors' prevailing incentives
Donors are torn between foreign policy objectives and developmental objectives, with the first often prevailing.
In Zimbabwe, for instance, the programme I was managing saw greater value in supporting its partners from behind the scenes. However, the donor was under pressure to establish and maintain an image of being a selfless partner, open to supporting genuine economic transformation, rather than perceived to be interested in toppling the regime.
In the Solomon Islands, the Australian government has invested so much since the establishment of RAMSI in 2003, that the pressure not to fail is very high. This is coupled with the need to show that, although RAMSI is phasing out, Australia’s presence remains - a legitimate need, given fears that social tensions recur after the end of RAMSI.
In this kind of scenario, donors often have pre-defined preferences for, (or vetoes of) specific partners, thus de-facto undermining the “systemic" nature of the MSD approach. For instance, in Zimbabwe, for obvious reasons, Zimbisa faces limitations when working directly with government.
One additional characteristic of this scenario is that, more often than usual, donors will want to “label” programmes with their name. This can risk undermining the ability of MSD programmes to differentiate their brand from the donor’s, and therefore lead to confusion among beneficiaries that the programme’s role is a source of finance, rather than a catalyst for innovation.
Implementers’ prevailing incentives
This scenario does not have a significant impact on the incentives of implementers. I found that, in Zimbabwe, collaboration among programmes was easier, but this may be due to the hostile political environment that donor initiatives face, which creates a strong sense of solidarity within the development community. In the Solomon Islands collaboration is more difficult, but that may be attributable to the size of the country, and high ODA per capita, as discussed earlier.
Beneficiaries’ behaviour is strongly affected by the political density of the environment.
In Zimbabwe, for example, there may be risks involved with partnering with a foreign-funded (particularly a UK-funded) programme, whereas in the Solomon Islands, years of direct intervention and financial support have created a strong relationship of dependency between a number of organisations and donors. In fact, the expectation that donors will provide funding and take decisions is so deeply rooted in the Solomon Islands, that finding partners with a genuine drive for innovation and desire to become more competitive in the market is a real challenge.
In my experience, the best strategy to cope in this scenario is to factor the political incentives of the donors into the strategic vision of the project.
In practice this may mean the need to operate on two levels. On one level the programme would allocate resources to respond to donor pressure, delivering the visibility that the donor requires, and working with the partners that the donor indicates. Up to 50-60% of the programme’s resources should be allocated to this type of activity.
On the second level, having ensured that the donor counterpart can fulfil its own obligations, the programme can then allocate the remaining 40-50% of resources to operating at a more experimental level. This would include working with below the radar, truly innovative and committed partner organisations. In order to do this, however, the programme would need to carefully manage its brand, possibly to the extent of having a different brand for its “real MSD” component.
This third scenario is probably the most challenging presented here, but I find that it can be the most rewarding. In politically charged environments, local players often strongly believe that donors are foreign to the market system. This makes it easier to determine whether the partners that the programme decides to work with are genuinely committed to its objective or not. In my experience, if the programme manages to break the barriers created by lack of trust, and to be accepted as a dependable source of advice and innovation, change can happen fast, and impact follows rapidly.
ConclusionAs said at the beginning of this post, the scenarios proposed here are quite crude and do not fully capture the complexity of implementing and MSD programme. However, I hope that the three scenarios, and the three main groups of stakeholders proposed here, can be a starting point for some structured discussion among us practitioners on the topic. I am sure that most of you have had experiences similar to mine, and have found ways to manage them effectively to the benefit of your programme. I am curious to know how.
Luca Crudeli has been a market development practitioner since 2008. He has experience in designing and managing programmes with a number of donors, primarily DFID, as well as DFAT (Australia), MFAT (New Zealand), UNDP and USAID. Luca designed and managed ENABLE, designed ENABLE2, and designed and managed Zimbisa a sister programme to ENABLE in Zimbabwe.
He is currently working in Mozambique, managing a new USAID market system programme in the agricultural sector.