The authors discuss their application of USAID’s Market Systems Resilience (MSR) Framework. The authors focus on the use of the tool to assess the resilience of the market system itself in a Somalian context, including an exploration of how market systems, in a few circumstances, provided support/opportunities that helped communities better weather COVID and other stresses. While the blog provides a good overview, the team’s work in using the market system resilience framework continues in other countries developing insights and learning that are expected to be shared with the wider community.
Somalia, like the rest of the world, was not ready. As the shock of the COVID-19 pandemic rocked global markets, Somalia saw temporary closures of offices, schools, and airports as well as fewer events, which also had less in-person participation. For over a year the world experienced restrictions that were extended over and over again, and while the restrictions in Somalia were fewer and shorter compared to other countries, the negative impact reverberated across the nation.
The Hajj—the annual Muslim pilgrimage to the holy city of Mecca—usually attracts two million pilgrims from around the world. According to a Veterinary Medicine and Science report, Saudi Arabia imported more than three million goats, sheep, cattle, and camels during the 2019 Hajj season. In 2020, the Hajj was cancelled due to COVID, resulting in the loss of an estimated $500 million in livestock exports from Somalia.
The setback came as the country’s livestock sector – which engages more than 65% of the population and accounts for up to 75% of exports and 40% of GDP – had been making impressive gains in strengthening resilience and managing risk. Decades of conflict, periodic droughts, and pest infestations have all made it difficult for Somalia’s economy to grow.
Zoom in to the individuals that depend on income from the livestock sector and now faced the unprecedented market shock from COVID. As it turned out, livestock exporters lost their main market and didn’t have relationships with buyers in other countries. Similarly, livestock traders didn’t have back-up plans to help them continue operations. Somalia’s livestock market system essentially shut down, forcing herders to sell at depressed prices and people to lose their livestock-related jobs. While Somalia’s livestock production systems may be resilient to many shocks, the market system they depend on was not.
Why was the market system so vulnerable? What can be done to strengthen the market system so it can better respond to and recover from shocks?
A New Methodology
Resilience is not a new concept; individual, household, and community-level resilience has been defined and researched by USAID and its partners for years. Less clear has been resilience at the systems level.
In 2019, the global resilience community was abuzz with excitement – and curiosity – when USAID released the Market Systems Resilience (MSR) Framework. Brimming with potential to address some of the questions we’d been struggling with for decades, people wondered whether and how the MSR Framework could help identify what market system capacities are needed to absorb, adapt, or transform in the face of shocks and stresses.
A resilient market system can buffer the impact of shocks on producers, the workforce, other market actors, and even consumers. But, to use an old adage, the system is only as strong as its weakest link. The MSR Framework helps identify the weakest links in a market system by assessing eight structural and behavioral characteristics of market system resilience to identify weak areas. The data gathered within the MSR Framework then helps inform market system interventions that facilitate the direction of market system change away from being reactive and toward being more proactive to shocks and stresses.
RTI International tapped its internal Research and Development funds to put the MSR Framework to the test in Somalia, assessing both the livestock and grain market systems in the Bay and Bakool regions. The results were shared with the USAID Somalia Growth, Enterprise, Employment, and Livelihoods (GEEL) program to inform their assessment of current activities and adapt future programming to strengthen the weak links in these market systems.
The MSR Framework assessment identified that the livestock market system in the Bay and Bakool regions was overall “Somewhat Resilient” (Level 2 out of 4) because there was a variety of products and services flowing through the market, but competition and business planning was limited, while access to services and products was not inclusive.
Overall, the MSR Framework provided an incredibly helpful diagnostic of where the market system was weak and why – pointing to focal areas for future programming. Some of our lessons learned using the MSR Framework include:
Based on RTI’s MSR Framework findings, the GEEL team is developing recommendations about current market system interventions that warrant scaling and new areas of programming that are needed to build market system resilience. The RTI team is also conducting an MSR assessment with USAID’s Feed the Future Kenya Crops and Dairy Market System Activity.
Reflecting on the presentations made at the Market Systems Symposium, it was clear that there is a significant interest in the MSR Framework. USAID recognized that “market systems resilience is a relatively unexplored area in development” and that their framework is exploratory for further testing, ground-truthing, and refining. This made the Market Systems Symposium a perfect platform to discuss and share the experiences, and we look forward to sharing more about our experiences at next year’s symposium.
Learn more about RTI’s food security, nutrition, and resilience work here.
In the following post, Kristin Beyard raises the importance of the role of MNCs and the increasingly aligned interests between MNCs and international development objectives. As she points out, MNCs, for a range of reasons, are realizing that their longer-term ability to compete and grow is dependent on more and more countries moving toward middle-income status. As a result, MNCs are, for their own interests, engaging in efforts to catalyze change that aligns with international development, and it presents an important opportunity for development practitioners to leverage the interests and capacity of various MNCs. One key for effectively leveraging the interest and capacity of MNCs is to remain focused on the systemic change objectives and not just the outcomes from where the MNC is heading.
Market systems shape and dictate how we produce, distribute, and consume goods and services. These systems are also key to development impact: To create meaningful economic opportunity in emerging markets, end global poverty, and grow sustainable, productive value chains, we need to transform market systems.
Today, multinational corporations (MNCs) are more motivated than ever to engage in market systems development (MSD)—that is, addressing market failures in a way that creates transformational and lasting benefits for the poor. In fact, many leading companies are already doing this work; they just call it by a different name. For MNCs, market systems development is about advancing their supply chain and corporate sustainability goals around the world.
Leading MNCs are acting to make progress on many of the same market systems challenges as the global development community, including stimulating and promoting better functioning local ecosystems of enterprises; identifying new ways to diversify and increase income for smallholder farmers; improving on-farm productivity and resilience; and opening up new markets to expand affordable goods and services for underserved populations.
In their efforts to transform markets, traditionally, the global development community has sought out ways to engage with and bring in the private sector. But we can also meet companies where they are, complementing and adding to their existing market systems development efforts.
To do this, it’s helpful to understand what motivates leading MNCs and the actions they are taking to drive market transformation.
Why and How Multinational Corporations are Engaging in Market Systems Development
We suggest three key ways that companies are advancing market systems development:
Companies exert influence within their supply chains and on local business partners.
MNCs are increasingly realizing that global risks—from climate change to COVID-19 to poor infrastructure in emerging markets—affect their ability to operate and thrive. Simultaneously, workforce and consumer demands are pressuring these companies to not just talk about what they will do, but take real, targeted action toward transforming their supply chains for greater sustainability.
As a result, a shift has emerged in how leading MNCs are approaching sustainability and social impact issues. Whereas before it was about developing a Corporate Social Responsibility (CSR) mission, today it is about integrating sustainability goals into core business strategy. For many MNCs, leading in sustainability and social impact is a means of seizing market opportunity and getting ahead of multiple supply chain and systemic risks.
To achieve this, MNCs are increasingly putting their energy, effort, and focus on their supply chains, to exert influence toward making the first mile more sustainable. These initiatives on the part of MNCs have reverberations up and down supply chains, and across industries: By pushing their suppliers and local businesses to adopt new and better practices, MNCs are shifting the system and creating changes that will also be seen across other overlapping corporate supply chains.
For instance, PepsiCo’s recent Global Development Alliance (GDA) with USAID seeks ways to integrate more women into the company’s agricultural supply chains and the businesses they work with. PepsiCo hopes to demonstrate the business case for these investments among peer companies, local partners, and other PepsiCo offices around the world. The partners hope to prove that leading in women's empowerment is also good business, by realizing previously untapped market potential.
MNCs look for ways to incentivize and engage a growing range of ecosystem actors.
Beyond focusing on their existing supply chains, MNCs are increasingly looking to form partnerships with other ecosystem actors who can help them solve some of the more complex social and market challenges they face. MNCs often have a comparative advantage in areas such as buying and production, but on stickier issues such as land rights and human rights, they need other actors to help them find and implement solutions.
As a result, we see MNCs innovating on the best ways to “crowd in” new ecosystem actors that are not part of their current supply chain yet can help fill critical knowledge, networking, or resource gaps.
An example: Through its acquisition of Pioneer Foods in South Africa, PepsiCo has set up an innovative development fund that has invited local NGOs and other market actors to approach the company with specific market challenges, proposed solutions, and lists of critical partners. Proposed challenges range from education to incubation/acceleration services for start-ups to helping transform farmers from subsistence to commercial farming. From there, Pioneer Foods is setting up consortiums of local actors who will implement new activities collectively.
This approach allows local actors to come up with the ideas—rather than the other way around—with the aim of building a stronger long-term market for PepsiCo to do business in and for the entire system to thrive.
MNCs invest in market systems analyses and stakeholder mapping in new markets to identify the right entry points and key partners.
More and more, we see that before an MNC will commit to entering a new market or investing in a new sustainability initiative, they want to know what the ecosystem looks like, who the current players are, the business motivations that will affect behavior and systems change, which sustainability challenges are ripe for tackling, and how specific projects and investments will further their goals. While the upfront investment in mapping and analyzing market systems may be greater, it helps companies identify and recruit the right partners to work on the right initiative, which leads to greater progress and more substantive market transformation.
Microsoft, under their Airband initiative, is bringing high-speed internet and connectivity to the most rural areas of the world. To achieve this ambitious goal, they are trying to build demand for services by partnering with and building up local internet service providers, energy access providers, telecom equipment makers, and other entrepreneurs in targeted countries to ready local systems, build more demand for their work, and design contextually relevant, cost-effective apps and services. Resonance has supported Microsoft in the mapping and analysis of new markets, helping to identify strategic entry points that would strengthen a country’s ICT enterprise ecosystem.
Driving Greater Impact on Market Systems Development
The global development community has an opportunity to work with the private sector to advance market systems development. By considering why and how the private sector is currently engaging in this work, we are better positioned to approach and partner with companies strategically and effectively.
We’d argue that the global development community can engage the private sector in market systems development in three primary ways:
For market systems development, the impact we can unlock by strategically engaging with the private sector is unlimited. By forging new partnerships and combining knowledge and resources with companies, the global development community can drive greater innovation and make more progress toward market transformation and sustainable, inclusive development.
The MSDHub Blog Series is authored by respected implementers and donors of market systems projects globally.