In the following post, Jessan Catre lays out an important case for housing, and especially housing for lower income populations, as needing to be a central organizing node for recovery efforts. While not explicit in the blog, he also highlights the importance of how relief efforts are organized to make sure they are catalytic and maintain/enhance the diversity of market systems. Often the knee-jerk reaction of recovery efforts are to give things to vulnerable populations, and often do this via large contracts to big firms. Such effort, while unintended, can do substantial damage to systems as they push out SME and informal firms, shifting power to larger firms, as well as redirecting these firms to focus on donor customers. The emergence of providing cash directly into the hands of the vulnerable population has been a welcome mechanism to inject resources that can be more effective at catalyzing greater positive knock effects. As Jessan recommends, recovery should not just be about getting back to where the system was, but taking the opportunity to lay the ground work coming out of a shock like Covid-19 that allows for a quickening pace of positive systemic change.
The COVID-19 pandemic has completely upended the life that Arfel Aljohon, a carpenter, worked so hard to build for his family in the heart of the Philippines.
In late March, all of Cebu island was put under "enhanced community quarantine," an almost total lockdown, including the temporary closure of non-essential shops and businesses. These restrictions, while necessary to minimize spread of the deadly virus, meant the pipeline of work he had lined up came to an abrupt halt, and with it the $8 to $10 he expected to earn daily. One of his daughters was a teacher at a private school, and she also contributed to the family purse. When the school closed, her salary stopped too.
Overnight, Aljohon and his family went from feeling comfortable to wondering how they were going to survive, let alone support their four aging parents and other relatives near their home in Bogo City, Cebu Province. To make matters worse, Aljohon was about to complete repairs on their house but now can’t afford to, so the family feels particularly vulnerable to COVID-19.
Aljohon’s ordeal is tragically common, not only across the Philippines but also in the other middle-income countries where Habitat for Humanity works to improve the resilience and inclusiveness of housing markets and help people gain access to a decent place to call home. So as governments and development organizations around the world consider how to prevent an economic and social catastrophe, it’s extremely important that they understand how local building and local housing markets really work.
Many of the 1.6 billion people who lack adequate housing make do by building and repairing their homes incrementally as family finances allow. Houses built in this way comprise from 20 to 70 percent of housing stock, depending on the country, in the Global South. The informal housing markets that caters to these builders are massive as well.
But shocks to the housing sector produce far-reaching ripple effects, starting with informal businesses like Aljohon’s. They are some of the most vulnerable to the effects of COVID-19. We are already seeing low-income families worldwide postponing construction projects and using the money for even more basic needs, such as food and medicine.
As a result, masons and carpenters stop working. Demand for materials decreases, hitting local building material retailers. Upstream, this affects construction materials manufacturers, with paralyzed supply chains disrupting the flow of raw materials. The disruption spans the entire construction supply chain. With manufacturing halted in many countries, critical building materials are unavailable to households. So even if and when families are ready to improve their homes, they are unable to do so.
Similarly, the financial sector also is in lockdown. Banks are deemed essential businesses but the microfinance institutions that most low-income homebuilders turn to for external funding are not. Without regular repayments, their survival is in jeopardy.
Fortunately, there is an upside to this complicated web of interdependence. A well-functioning housing market can serve as the foundation to the economic recovery needed to create prosperous and resilient societies. Under normal circumstances, the construction sector, of which housing is an important segment, is one of the largest in the global economy, representing $10 trillion in spending annually and employing millions of people such as Aljohon. Many governments, from the Philippines and Peru, realize this. They are already using investments in the construction sector, of which housing is a part of, as a driver for economic recovery from COVID-19.
But the devil is in the details. Incorporating housing into relief packages will mean little if those plans overlook the needs of low-income homebuilders and households. Three actions, in particular, will keep them at the center and truly strengthen the resilience and inclusiveness of housing markets:
First, as governments begin to invest in the housing sector in order to spur economic recovery, they must design bailouts with the informal sector in mind. In addition to working with large or mid-size developers focusing on new construction, they must ensure that funds flow to small-scale developers and businesses or microfinance institutions that can channel capital to people seeking to upgrade or expand existing homes.
Second, it is crucial that aid does not displace local market actors—including construction material companies, hardware stores, training providers, media entities and financial institutions—who will be irreplaceable in providing those services and products into the future. Financial relief should be channeled through these local housing market actors and when possible, through cash-based programming to make their homes safer during the pandemic.
Finally, as governments take steps to designate construction and housing as essential services, we must focus on the safety of the people who will be building back our communities and our economies. Construction laborers need access to personal protective equipment and training in how to use it. They also must be familiar with appropriate physical distancing guidelines and good hygiene habits to keep themselves, their clients and their own families safe.
Taking action now will help ensure the survival and resilience of informal housing markets that are so crucial to economic recovery. More importantly, they can help reverse the fortunes of families such as Aljohon’s who can once again feel secure in their own homes. That will allow them to begin building back their neighborhoods and, along with it, the hope that everyone in their community can house themselves safely, securely and sustainably.
Jessan Catre is the Philippines Country Manager at Habitat for Humanity’s Terwilliger Center for Innovation in Shelter
In the post below, the authors discuss the use of a contest/competition tactic in raising awareness around a specific challenge. The use of contests and/or competitions have been around for a long-time outside development. As a tactic it has shown to be useful at raising awareness and focusing attention on a specific issue, challenge or product. From a market systems perspective, when using such tactics a project should consider a few lessons that have emerged over the years. One important lesson has been that throwing money at a complex development challenge has not been effective. Interestingly, the phrase ‘pay for results’ seems to be a the wrong way to describe the use of competitions. The project seems to be raising the importance/value of certain technologies that for some reason have been undervalued. In this context, the project is not paying for results, but catalyzing local actors to rethink the value proposition of that technology that they can then take forward in pushing adoption as appropriate in their contexts. Another lesson is around sustainability. For a country to continue on a journey to self-reliance, adopting a discrete technology is necessary, but not sufficient. A country has to develop the capacity to effectively identify, prioritize and allocate resources in response to various threats and opportunities. As a result, systems thinkers are keen to understand why such practices and products were not taken up previously, as well as how the system would come up with the next innovation without a donor project. In this context, raising awareness and focusing attention on a specific issue/challenge is an important skill that needs to be resident in a system. Longer term sustainability suggests that a project might want to shift from using such tactics directly to catalyzing local actors including market, civil society, government, etc. actors to learn how to use contests and competitions as a tool to help raise awareness and focus attention on issues they find important.
COVID-19 has dramatically altered the landscape of international development. As the world grapples with how to address this crisis, resource shortages hamper many potential responses. These gaps can shift national priorities, altering the trajectory of the development sector along the way. Host governments, development donors, the private sector, and everyday citizens are all struggling to balance the immediate need to quell the spread of disease with long-term development goals. Given this lens, the development community must adopt innovative approaches to sustain pre-COVID efforts. Now more than ever, it is crucial to leverage private sector investment to complement public resources.
Using Pay-for-Results Competitions to Strengthen Resilience
With an emphasis on engaging the private sector, motivating innovative solutions, and strengthening linkages between market actors, Pay-for-Results (PfR) mechanisms can be a powerful tool in the coming months and years as the development sector moves forward in the wake of COVID-19. PfR approaches, such as AgResults’ prize competition model, help build resilience because they tackle problems with contextualized solutions and encourage local actors to develop linkages with others along the value chain. Rather than providing funding up front, PfR prize competitions incentivize private sector actors to develop and deliver solutions to market challenges that disproportionately affect vulnerable populations such as smallholder farmers. As they achieve prescribed criteria, these “competitors” receive prize payments. The result is economically driven changes in behavior that provide vulnerable populations with access to resources that they could not previously afford.
Although PfR prize competitions do not work directly with vulnerable populations, they engage the private sector to interact with these groups to drive long-term shifts in behaviors. During crises, vulnerable populations are often the hardest hit, and it often takes the longest time for them to fully recover. By encouraging solutions that increase farmers’ access to new markets and strengthening relationships along the value chain, prize competitions can strengthen resilience – an important outcome during a crisis like COVID-19 and in the long run. In this way, prize competitions have the potential for critical short-term and long-term development impact.
Encouraging Sustainable Value Chain Linkages in Kenya
AgResults’ successful work in Kenya to drive smallholder farmers’ uptake of on-farm storage technologies shows how an approach that engages the private sector can effectively address a market failure and encourage resilient linkages. The competition, which incentivized companies to develop, market, and sell on-farm storage devices to smallholder farmers, had significant economic and food security benefits: More than 300,000 farmers benefited through sales of 1,390,777 devices that created 413,265 MT of improved storage capacity. Looking through a lens of market systems development, the competition encouraged private sector actors to invest in new relationships with vulnerable populations, strengthening the overall market. The stakeholders who participate in these value chains are now better positioned to deal with future food security threats or other crises in coming years. (AgResults plans to examine the long-term sustainability of this competition through its External Evaluator in the future.)
Boosting Farmers’ Ability to Respond to Economic Shocks in Vietnam
In Vietnam, AgResults’ aim to reduce greenhouse gas (GHG) emissions by incentivizing improved cultivation practices in rice production is strengthening the value chain and farmers’ resilience to economic shocks. The competition incentivizes grain traders, seed producers, and input suppliers to implement innovative agronomic practices, such as advanced irrigation techniques, with specialized inputs to increase productivity while lowering GHG emissions. Initial results from the first two growing seasons have been scaled up in Seasons 3 and 4 to reach over 20,000 smallholder farmers. Broadly, the competition is cultivating new linkages between the private sector and smallholder farmers, changing long-term behaviors so these populations can better respond to climate change and other threats.
COVID-19 has rattled the entire global system, with economic impacts cascading into developing markets and hitting vulnerable populations especially hard. When designed to intervene in the right contexts, PfR prize competitions can effectively target market failures and motivate new types of relationships that strengthen the whole system. As the development sector reflects on its new role in the wake of the COVID-19 pandemic, exploring newer development financing approaches such as Pay-for-Results may carve out opportunities that drive both immediate response and longer-term resilience.
Rodrigo Ortiz is the lead consultant for the AgResults program. He has worked in 86 countries and draws upon over 30 years of development experience.
In the post below, Bidowra and Mark provide an interesting example of how to support a single firm as they adapt and grow their online delivery business model. The case raises important and often ignored elements of good systems thinking, including systemic resilience. It highlights important insights and guidance on how to engage with a firm, which is certainly necessary, but not sufficient. Good systems thinking needs to also include how an initial interaction with a firm catalyzes other firms to see such behaviors as attractive, as well as how the system becomes more diverse. While Chaldal is demonstrating good behaviors, systemically, the online delivery market segment can only adapt and grow over time if it includes a diverse set of lead firms that invest in developing competing supply chains. Additionally, from a systemic resilience stand point, there would be concern from focusing too much on a single lead firm to gain scale as that would likely increase fragility, as structures that rely on a single node can easily fail if that node/firm stumbles. A real challenge when applying systems thinking is the importance of maintaining multiple perspectives using different analytical lenses so the project can catalyze ongoing improvements in and alignment of the competitiveness, inclusiveness and resilience of the market system.
Based in Dhaka, a densely populated city of nearly 22 million, Chaldal is the largest online platform for grocery delivery in Bangladesh, capturing roughly 80 percent of the country’s market shares of online grocery and retail sales. When the COVID-19 crisis hit Dhaka in March, more households relied on grocery delivery services to social distance and prevent the spread of the virus. Chaldal’s average deliveries rose from 3,000 to 15,000 per day.
This growth opportunity also presented a dilemma. While the company already sourced rice and grain products from wholesale markets, the fivefold increase in demand for their products from urban customers meant they needed to significantly grow their supply without sacrificing quality. They did this by sourcing aromatic rice, pulses, and oilseeds from aggregators who procure from farmers supported by Feed the Future. New warehouses, an expanded workforce, and additional motorcycles for deliveries boosted their operational capacity, but this alone wasn’t enough.
Technical support from the Feed the Future Bangladesh Rice and Diversified Crops (RDC) Activity aided Chaldal in developing a more agile supply chain and new products. Recognizing the market opportunity, Chaldal developed a “know your rice” campaign to highlight the benefits of locally produced premium rice varieties. The campaign allowed Chaldal to market its products sourced from rural Feed the Future areas to urban areas. It also allowed Chaldal to expand its supply chain portfolio, ensuring food availability for the urban poor, with a focus on marketing nutritional products, such as zinc rice, to women and children. Existing customer databases allowed the company to target these market segments with promotional campaigns through bundling fast-moving consumer goods and promotional packets of nutritional products.
The RDC Activity, which is funded by USAID and implemented by ACDI/VOCA, helped the company fast-track their hiring process using virtual trainings for new delivery employees. The RDC Activity also helped Chaldal develop a network of procurement agents and millers, set up stricter hygiene protocols, supply employees with face masks and soap, and impose regular cleanings of its vegetable sourcing, processing, and packaging facility. As a result, Chaldal is on track to meet delivery demands. The company plans to use this supply chain infrastructure to create trade efficiencies and expand its sale of fresh vegetables and perishables. Although Chaldal had the resources to make this transition on its own, the RDC Activity’s support redirected the management of these resources and made them a priority for the business to adapt and respond to COVID-19.
The successful shift in business operations shined a light on how global development entities should engage with the private sector. To increase the agility of enterprises to adapt to market shocks, development organizations must understand the context of the problem, co-create a solution with the company, adapt to rapid changes, and use data to inform responses for both the donor and the enterprise.
Adjusting how we think about partnerships requires major behavioral shifts and acceptance of that fact that there will be failures. In 2019, USAID launched a policy that began the process of institutionalizing private sector engagement as a core part of its operating model. ACDI/VOCA’s own private sector engagement approach explores how to incentivize the right enterprises in the right ways to weather a storm — not only for their own gain, but also to strengthen the broader market systems.
Understanding the Problem
Understanding how and why businesses behave the way they do is the first step toward engaging the right partners to strengthen local economies and contribute to development objectives. It is an approach that begins with analyzing the market to discover the root causes of poorly performing sectors. Better understanding can come through identifying business and decision-making norms, highlighting gaps in financing, defining problems or opportunities rooted in gender and social inequalities, or gauging openness to inclusive business methods.
The RDC Activity drew upon its previous Chaldal partnership, which focused on marketing, as well as its COVID-19 analysis to identify ways in which the company was already resilient and to determine the new challenges it faced. This created an opportunity to develop a mutually beneficial partnership focusing on expanding opportunities targeting the urban poor with nutritional products. Through this process, the RDC Activity also helped Chaldal identify promotional campaigns at schools where mothers pick up their children. This proved to be a very effective channel for push marketing.
Co-Creating the Solution with the Private Sector
When a development organization approaches a company with a predetermined plan for how to partner, the company can only accept or reject it. By shifting the conversation to say “Here is what we are seeing on the ground. What are you seeing?” we open up the terms of engagement and increase the likelihood of partnership. Through this process, there is an opportunity to collaborate and co-create with the private sector.
The RDC Activity started working with Chaldal in 2019 to promote fine and aromatic rice varieties through innovative marketing. This involved facilitating meetings to introduce Chaldal to millers and procurers of rice. Based on this previous experience, it was clear to Chaldal that the opportunity to source its products from the Feed the Future zone would add value to their market in Dhaka. The RDC Activity brainstormed with Chaldal’s CEO on how to respond to the increasing demand, while also meeting the mandatory safety protocols of warehouse and delivery systems. Based on this discussion, Chaldal co-created the proposal with technical assistance from the RDC Activity.
Responding to Rapid Changes through Adaptive Management
Investing time, energy, and trust-building resources into partnerships with the private sector allows for more flexibility when changing circumstances, such as COVID-19, disrupt supply chains and business models.
Since the COVID-19 crisis began, ACDI/VOCA programs around the world have been helping enterprises pivot through adaptive management. As was the case in Bangladesh, sometimes that means lowering the barriers and simplifying the process for engaging with enterprises to become more agile.
In an article published by USAID, Anar Khalil, the RDC Activity’s agreement officer’s representative at USAID’s Bangladesh Mission said, “We looked at past programs and realized that the traditional design process — from the moment we put together a concept idea to procurement — takes 18 months to two years. So, by the time the project is awarded, these ideas are old.”
For the RDC Activity, adaptive management meant quickly moving forward with applications that had the most potential to create both immediate and long-term solutions resulting in more resilient systems that are better equipped to cope with shocks. This flexible approach allowed Chaldal to address self-recognized pain points and make a quick pivot to its business model. It also allowed the company to expand its capacity to increase sourcing and offer farmers market opportunities in the middle of unprecedented shocks in demand for their products. The RDC Activity’s streamlined grants process identified key evaluation criteria and removed barriers to participation. Recognizing the urgency of addressing COVID-19 constraints, USAID waived its one-to-one fund matching requirement for sub-grants related to COVID-19 responses. This allowed the RDC Activity to pivot its approach and turn applications around much faster. The RDC Activity co-created their final agreement with Chaldal to ensure any proposed solutions were realistic and could address the challenges the company faced.
Measuring and Learning from Results
Data informs both companies and programmatic decision making. Based on their learning from annual performance surveys and rapid situational analysis, the RDC Activity was able to better understand which business models and interventions could lead to systemic changes in the agriculture market system. This informed how the RDC Activity worked with Chaldal, especially supporting the company’s ability to decide where to expand and to focus on the investments needed to meet demand. Mutually beneficial data increased the capacity of Chaldal to identify, prioritize, and allocate resources more broadly into their supply chain operations.
Agile Responses Lead to Systemic Change
ACDI/VOCA’s portfolio approach to private sector engagement recognizes the needs to shift thinking beyond firm-level investments and, instead, to look at the broader group of firms supported and their contribution to a stronger system. The RDC Activity’s systems approach is predicated on collaboration within the market system through facilitating connections between enterprises and creating incentives for multiple firms addressing a common challenge. Its partnerships are also linked to the activity’s systemic change objectives.
This has resulted in a stronger supply chain and distribution model that is improving the competitiveness and resilience of the agricultural market system. For example, the RDC Activity facilitated connections between agriculture mechanization providers and rice companies to develop branded “franchise service operators” who provide services to thousands of farmers in their network. That led to continuous maintenance support, established farmer databases, and scheduling and training programs for equipment operators with new companies entering the market.
Chaldal’s aggregators target these farmers as part of their increased sourcing from the Feed the Future zone. The company intends to increase rice procurement from rice mills that are dependent on a pool of farmers, including female farmers, who produce single variety rice. This will happen once they establish quality and pricing standards and develop partnerships with regional seed input providers.
The RDC Activity is making the inclusive business case for Chaldal to invest in women both as producers and consumers. To date, the RDC Activity has invested in 37 enterprises with 54 unique interventions, resulting in $3,182,462 in sales and procurement to 344,654 farmers who have accessed improved services.
From the private sector perspective, having the ability to adapt and innovate during challenging times leads to more inclusive, sustainable, and agile responses.
“When the COVID-19 crisis hit, we were flooded with orders,” Chaldal CEO Waseem Alim said in an interview. “USAID and RDC came in with COVID-19 emergency support, which was used to help adapt and expand our business operations while ensuring continued safety of our employees.”
Adaptive approaches lead to increased sales and a strengthened ability of firms and the broader system to not only increase food security but also respond to future crises. The result is more sustainable and scalable opportunities benefitting farmers.
Bidowra Khan, Market Systems and Social Inclusion Specialist for the Feed the Future Bangladesh Rice and Diversified Crops Activity
Mark Sevier, Technical Director of Market Systems and Partnerships for ACDI/VOCA
Do successful housing microfinance portfolios spur similar loan products? Lessons from the Republic of Georgia.
In the piece below, Monica Raskin from Habitat for Humanity’s Terwilliger Center for Innovation in Shelter describes the outcomes from an internal assessment of the systemic impact of their financing efforts. The post lays out some interesting outcomes that they identified from the assessment. In reading it, an important systems-thinking concept stood out for me as needing to be raised. Systems change over time is tied to the when/how certain signals or feedback emerge as either more or less influential. As Monica points out, microfinance organization to microfinance organization signaling, at least related to this segment, has had very little influence on the overall financial service system. It would be very interesting to learn more about why this firm-to-firm feedback is not influential, including how the Fund could amplify such internal signaling.
Habitat for Humanity’s Terwilliger Center for Innovation in Shelter launched the MicroBuild Fund in August 2012 to increase access to affordable housing finance products and services for low-income households globally. The fund bundles capital and technical assistance to financial institutions to demonstrate housing microfinance’s value to the broader industry. In doing so, the Terwilliger Center aims to shift the global portfolio allocation for housing finance from 2 percent to 10 percent of the general gross loan portfolio, among microfinance institutions (nationwide) in the countries where MicroBuild has investments.
As of July 2020, the fund had disbursed USD 136.9 million to 55 institutions across 32 countries, and helped nearly 930,000 households improve their shelter. Additionally, MicroBuild has seen success with many investees scaling up their housing portfolios after receiving capital and technical assistance from the fund.
While the fund has accomplished much to date, in 2019 the center decided to assess whether it was creating true market systems change. Specifically, we wanted to understand if MicroBuild’s investments in financial institutions were resulting in non-MicroBuild financial institutions adopting and scaling housing microfinance products. And, we wondered, was such a strategy to encourage broader product adoption the best way to scale housing microfinance offerings in a given country?
A three-week field study last year in the Republic of Georgia provides one answer. Habitat for Humanity’s Terwilliger Center selected Georgia for many reasons: the high country exposure within the MicroBuild Fund portfolio; substantial market share held by investee institutions; growth of local investees’ housing microfinance portfolios; and the high degree of openness to obtaining microfinance data. Further, the fund had been invested in Georgia for many years. It invested in JSC Credo Bank in 2013 and in JSC MFO Crystal in 2016. Finally, both MicroBuild investee institutions were market leaders within Georgia’s microfinance sector and thus potentially influential to other institutions within the country.
The field visit produced several key findings:
These findings, while offering specific insights into the Georgian market, also have informed the Terwilliger Center’s global approach to scaling the MicroBuild Fund and achieving market systems change. Based on the findings, the fund adjusted its scaling strategy to a more nuanced approach in certain markets where a small subset of financial institutions held the majority of the microfinance sector’s market share. In such countries, the fund would aim to either scale exclusively through MicroBuild investee(s), or by also crowding in a limited number of other financial institutions (in markets where approx. three to five institutions held over 70 percent market share). For countries where scale would be expected beyond MicroBuild investees, the center is now looking to develop a sector influence strategy to ensure that program initiatives provide clear, actionable information to target institutions on how to develop, refine and scale housing microfinance products.
In doing so, the Terwilliger Center can pursue a more nimble (and often more efficient) means of scaling housing finance within MicroBuild’s countries of investment to reach 10 percent of the general gross loan portfolio nationwide. Finally, the center will continue to make the case to the broader financial sector to further crowd in capital in countries and institutions where MicroBuild has proven that housing microfinance can be a good investment.
Read the full report from Habitat for Humanity’s Terwilliger Center here, under the title Exploring the adoption of housing microfinance within the Georgian market.
Stay in touch! Follow the Terwilliger Center on Twitter at @TerwilligerCtr and sign up for the center’s quarterly newsletter here.
In the post below, the authors lay out how COVID19 has also become a positive disruptive force in some circumstances. Specifically, the need for physical distancing and limited travel have substantially amplified the value of digital solutions to various business practices/functions. With the amplified value came multiple opportunities to adapt these possibilities to new services and products. As the post also points out, with any disruption that creates opportunity, how the society/market systems respond will determine if the change will align with or catalyze ongoing movement toward a more inclusive economic system. An integral part of this conversation has to also include the interconnectedness of other systems like judicial systems, political systems, civil society systems, etc. How these systems interact and depend on each other effects how digitization will unfold and if it will lead to greater inclusiveness, competitiveness, and resilience.
With the unfolding COVID-19 crisis, countries like Kosovo will need to accelerate digital transformation for private sector development to increase resilience and optimize business processes. The impact of the crisis in the short term—but probably also in the long term—will shift the Kosovar economy towards a digital economy. It has already resulted in an increased offer of digital training providers. The increased digitization of the economy is happening by automating production processes.
How can development initiatives like the EYE project in Kosovo play a role in supporting the shift to the digital economy? A project of the Swiss Agency for Development and Cooperation (SDC), EYE is implemented by Helvetas and MDA.
Research and Investment in Digitalization
In January 2020, the EYE project conducted a study that found that it isn’t just the growth of exports in the information and communication technology (ICT) sector that will lead to sustainable economic growth. It also comes from the application of digital solutions to the wider economy (e.g. energy supply, finance, agriculture).
The COVID-19 crisis has motivated public and private education providers to develop digital training. Smart investment in R&D is essential to go beyond the ‘welfare package’ and support the training and education industry together with the labor market integration providers to adapt to the new post-COVID-19 environment.
There are promising examples that show how the market is changing in the face of the crisis. One of the partners of the EYE project, Pyper, has been operating in the primary data and research market in Kosovo for about a year and a half. It has been promoting the use of technology in research services and raising awareness on the importance of accurate information in decision-making of the business community, public sector, and the media.
According to Vigan Ramadani, co-founder of Pyper, the crisis has produced opportunities to move industries to adopt technology in research, and they’re doing their best to ride this wave and accelerate the trend towards digitalization. “During the COVID-19 crisis, we received many requests from different companies to collaborate and introduce them to the online research methods, which is a great development considering that in the past we have found it difficult to convince companies to research mobile or web-based tools,” said Ramadani. As a starter, the company just collaborated with some stakeholders, such as the Kosovo Chamber of Commerce, the American Chamber of Commerce, the Chamber of Doing Business in Kosovo, RIINVEST, and dua.com, to develop a research paper to pinpoint the difficulties that businesses are facing as a result of COVID-19. This research is now being used by businesses, policymakers, and development organizations to plan and adapt their interventions.
Linking Investment in Digitalization with Skills Development
Targeted investment, as shown above, builds connectivity in infrastructure, promotes digital firms, and supports the digitalization of the wider economy. This becomes meaningless without a nimble skills training sector twinned with smart job-matching services, both of which should focus on an increasingly digitalized economy that keeps pace with the acceleration of technological development. Fundamental in this is the ability to provide access to training through digitalization and blended learning, modular and flexible training, and investing in long-term sustainability.
Digitalization has increasingly progressed well in Kosovo, pushing for the growth of online training. Non-formal education is one of the sectors that the EYE project has worked extensively in. The demand for online training has surged. The project, therefore, is reorienting its support to digital services and working proactively with partners to identify opportunities.
KUTIA, is a Kosovo-based business that creates web applications and e-commerce platforms among a long list of other ICT services. EYE is supporting KUTIA to adopt an ICT training curriculum and deliver this training in Kosovo. In-class sessions are not possible due to the pandemic. Thus, the idea was to set up the necessary infrastructure to make the full digital transition to offering online training and improve accessibility. “We’re fully transitioning to online format due to the COVID-19 situation. We hope that the online courses will help adapt to the crisis,” says Merita Citaku, Coordinator at KUTIA for Beetroot Academy. The transition training has attracted the attention of 300 new potential participants so far.
Another tectonic shift is in recruitment and matching services. Organizations are becoming increasingly dependent on technology to make sure their teams work efficiently. The workforce is changing, and employers are progressively looking to hire more remote or freelance workers.
Kosovajob is an example. It is a digital job-matching platform that is establishing, through the support of the EYE project, a new software called SIMBA that will combine recruitment, career guidance, and labor market information into one platform. SIMBA was created long before the pandemic, but it has had a remarkable impact on businesses to adapt to the pandemic. The pandemic accelerated the digital transition and SIMBA not only simplified recruitment, but also helped keep everyone safe by removing any need for in-person recruitment. ‘I believe digital services are among the best investments that companies can make,’ stresses Arion Rizaj, the founder of Kosovajob and SIMBA.
Another digital transition that is being fast-tracked is in the business process outsourcing (BPO) sector in Kosovo. Due to its cheap labor, skilled workforce, and geographical proximity to Europe, Kosovo has become a regional nest for offshore outsourcing in recent years. Recently, EYE entered into a partnership with SPEEEX, the largest BPO provider in Kosovo, to support them in creating SPEEEX Education—which provides training and employment for young people. As a large company focusing on BPO in the telecommunication sector for the Swiss and German markets, SPEEEX’s Education component has quickly become a keystone of the organization: as it works to impart skills for hundreds of young people, it also creates a wider pool of job seekers with the right skillset to choose from.
But as the pandemic unfolded, this education provider was also quickly forced to make the digital transition. ‘The COVID-19 pandemic has impacted organizations across nearly every industry and changed how they deliver products and services,’ says Vigan Disha, Managing Director of SPEEEX Education.
The Way Forward
In another recent Helvetas blog on leveraging capabilities of newly acquired technologies because of the COVID-19 pandemic, our colleague Shawn Cunningham argued that “to fully benefit from the new capabilities that technologies provide, we have to let go and re-think our arrangements around the new technology. This is an iterative process. So, we adapt the technology, and then we re-model ourselves around it.”
Not everything is rosy. The risk is that the benefits from the above developments will not be equitable. Until now, EYE looked at increasing the offers of digital training. This also needs to shift to equitable access. As much as digitalization has spread to many parts of the world, knowledge isn’t just a mouse-click away for many young people in Kosovo. It’s important to keep in mind that disadvantaged and vulnerable groups and those already affected by other crises are in acutely precarious situations due to the COVID-19 pandemic.
To be able to represent the rapid change well, the EYE project must also change its internal knowledge management and learning. We’re increasing our investment and attention to digital technology to systematically make available key data and lessons-learned and to capture tacit knowledge and make it explicit.
Zenebe B. Uraguchi, Programme Coordinator, Senior Advisor Zenebe Uraguchi is a development economist. Currently, he is at Helvetas working as rhe Regional Coordinator for Southeast and Eastern Europe and Senior Advisor for inclusive systems development. His professional experience spans more than 17 years and his areas of expertise include the design, management, and evaluation of private, public, and non-profit development initiatives, focusing on employment and income.
Lea Shllaku, Senior Intervention Manager for the Eye Project Lea Shllaku is the Senior Intervention Manager for the EYE project, covering the private sector development portfolio. Previously, she covered the skills development component of the EYE project. Her primary areas of expertise are in designing and managing interventions on skills development and private sector growth.
Lisar Morina, Communications Officer Lisar Morina is a media and communications professional working at the nexus of development and communication. He is currently engaged with Helvetas Kosovo in the EYE project.
In the post below, ACDI-VOCA provides an excellent summary of the first month’s sessions on market system resilience. An important distinction that is always worth reiterating is that when we are talking about resilience we are talking about a complex, multi-dimensional set of social processes. What this means in practice is that there are numerous ways in which a society can be resilient. In every country where I have worked, I am have been amazed at how resilient communities are when dealing with shocks and stresses. At the same time, their resilience capacity has evolved to be resident within informal community structures and mechanisms. While effective, such resilience capacity does seem to have trade-offs in terms of growth and inclusiveness as the responsibility for absorbing a shock or stress fully rests on a community that, as a consequence, requires community membership in order to access support. What we are learning is that for there to be alignment between competitiveness, inclusion and resilience, a society needs to rebalance it resilience capacity orientation from absorbing emergent risks via informal community structures/mechanisms and toward a combination of national, fair, and transparent social safety net/emergency response services and market mechanisms that can identify, prioritize and allocate resources to mitigate/neutralize risks as they emerge.
The global shock of COVID-19 has thrust market systems resilience (MSR), and systems thinking more generally, to the forefront of our development programming. It has never felt more urgent and relevant to come together around MSR. As the first month of this year’s Market Systems Symposium comes to a close, ACDI/VOCA is compiling the key takeaways and reflections.
MSR is Not a Trade-Off But a "Must Do" For Long-Term Competitiveness
USAID and it’s implementing partners have made significant progress over the last year developing definitions and conceptual frameworks to describe, assess, and measure MSR. This work has helped raise the importance and understanding of MSR and how it squares with the other two performance objectives of market systems development: competitiveness and inclusion.
We are quickly learning that without building system resilience capacities, social and economic development gains will remain fragile. MSR has often been framed as a trade-off that businesses and systems need to make between growth and value creation and protection from future shocks or stresses. It’s now a given that shocks and stresses are inevitable, and the systems that are best prepared to manage them will be the most competitive in the long run. There are still, however, only a handful of development programs applying these concepts intentionally. As an industry, we should be emphasizing systems resilience in our programs to protect against future shocks and build a more inclusive and competitive market system over time.
Context Should Inform the Determinants of MSR
As USAID’s Tatiana Pulido said, “Balance and context matter more than absolute measurements” when using the MSR framework. Case studies from the field helped mirror this point. For example, RTI’s Tracy Mitchell shared how their Growth, Enterprise, Employment, and Livelihoods (GEEL) program in Somalia selected the domains most suited to the local context to allow for a deeper dive into its measurement of systems resilience. Similarly, ACDI/VOCA’s Dun Grover shared how the USAID/Honduras Transforming Market Systems (TMS) Activity conducted stakeholder workshops and inferential analysis to understand the most important determinants and capacities to systems resilience.
Sometimes, the shock itself can reveal capacities (or lack thereof) at a systems level. Bernard Conlih de Beyssac, of Helvetas West Africa, shared in the community forum that, in Burkina Faso, the vulnerability of agricultural logistics quickly became apparent once passenger transport services halted. He cautioned against the instinct to immediately fix what seems broken and return to a pre-shock way of being, which he called “the old temptation to relieve rather than strengthen the system and its actors.”
Speed and Participation Inform Systems-Level Responses
While studies around the impact of COVID-19 on food and market systems have been robust, there are fewer examples of how the information is informing key decision makers and market actors. One such example came from Honduras. ACDI/VOCA’s Dun Grover shared how the TMS Activity’s relationships with a local university, chambers of commerce, and government institutions enabled them to conduct an enterprise survey just three weeks after a country-wide lockdown. The team collectively analyzed the data to understand the impacts of COVID-19 on enterprises across four sectors. In the tourism sector, this effort catalyzed a tourism roundtable, which then established a fund to support some 250,000 tourism sector employees financially and with online training and e-commerce support for their businesses. Similarly, in Uganda, MIT’s Courtney Blair shared how a systems pathway toolkit is serving as a valuable communications tool to help market actors understand systems health and the impacts of COVID-19 through systems mapping.
Build the Resilience of Systems—Not Individuals
Market systems, and arguably humanitarian efforts, should focus on systems-level risk. As USAID’s Kristin O’Planick said, “How can we help systems better manage their own risk?” For one, government policies and capacity are extremely important. Systems-level strengthening strategies shared by participants included the following:
Build the Ecosystem for Innovation and Entrepreneurship
The innovation and entrepreneurship panel brought to light the importance of a vibrant entrepreneurial ecosystem in building a resilient market system. The benefits of having diverse market channels, products, and market actors is that they allow systems to adapt to new suppliers or buyers during a shock. A diversity of enterprises also comes with a diversity of resilience-building solutions and innovations that can help firms better manage risk.
For example, in Honduras, e-commerce providers are helping enterprises move their business online. While, in Somalia, dairies are developing an innovative camel milk leasing scheme to ensure a steady milk supply during lean seasons.
A market system with a diversity of ideas and businesses will have greater ability to weather the next shock. At the same time, it is important to support small and growing firms to ensure a more equitable, inclusive market system and prevent further disparities between large and small firms after a shock.
Establish Social Safety Net Infrastructures
A healthy entrepreneurial ecosystem requires a formal and transparent social safety net infrastructure that is proactive in managing risk. This ecosystem involves more than just business development service providers; it involves policy, social safety net, cultural, and other institutions. Add to this a whole set of identity and social norms that encourage risk taking and entrepreneurial activity.
Communities and businesses cannot take on all the risk in a market system alone. Governments need to see that it is in their interest to provide transparent social safety net infrastructure and disaster risk services. This is a natural synergy point for humanitarian and development efforts to join forces to invest more in institutions and structures that provide emergency management, stimulus for vulnerable businesses, and business development services that can support and connect entrepreneurs.
Who to Bail Out and How?
As EcoVentures International’s Mike Field pointed out, the methodologies for understanding which enterprises are critical to maintaining market structures and functioning is a new area that we need to better understand. Within the Aspen Network of Development Entrepreneurs (ANDE), the focus is on supporting small and growing businesses, rather than necessity entrepreneurs, because they drive growth and innovation and pivot more quickly. Support systems need to help innovation speed up over time so that technologies and solutions can deal with the next challenge.
Foster Connections and Broaden Participation Among Enterprises
When firms are connected, they are much better at managing stresses and shocks. Intermediary organizations, such as business accelerators, often act as a bridge. While accelerators may be good at connecting entrepreneurial networks, they also have built-in biases that cause them to exclude more marginalized entrepreneurs. To encourage diversity, we should look to broaden participation. For example, ANDE’s Matthew Guttentag pointed to research showing that accelerators with more women on selection committees resulted in higher levels of support to women entrepreneurs. Similarly, the types of mentors that accelerators select also reflect on who ends up participating in accelerator programs.
Social Norms Influence Risk Taking
Cultural and social norms also influence entrepreneurship. DTA Innovation’s Elizabeth Long underscored how communal norms are not always supportive of risk taking or put significant burdens on business owners to provide family or community safety nets. For example, women often face threats from how society perceives them as an entrepreneurs, which may lower their confidence, risk taking, or ability to obtain funding. Additionally, entrepreneurs are not always the decision makers, despite being the one interfacing with the accelerator. Support systems can address these concerns through social and behavior change efforts as well as their outreach and capacity building.
Gender and Social Inclusion Facilitation Tactics
Marginalized groups face higher barriers to entry when starting an enterprise or accessing benefits from the market system, as ACDI/VOCA’s Jenn Williamson noted. When a market system is inclusive, the structures within it facilitate equal access to resources. The structures also enable the decision making required for women, youth, people with disabilities, and other marginalized groups to have the agency to acquire those resources and to influence the systems in which they live. The inclusion panel discussed several needs that market systems development programs should consider:
This post was written by ACDI/VOCA
By Emmet Murphy, Senior Technical Advisor, Creative Associates International
In this piece, Emmet covers an interesting applied case of market systems resilience in Nigeria. The post highlights the importance of fast and slow moving variables, including the need to learn more about interdependence/interconnectivity of variables that are very easily influenced and variables that are not as easily influenced. The blog also points out that markets have limitations especially when faced with certain shocks, like Covid-19, and that government and civil society have a role in shaping how markets weather and emerge from such shocks. While Covid-19 has hit the Nigerian maize market hard, the shock also presents opportunities to catalyze change at a more fundamental level. For Emmet’s and other projects, capturing learning about when and how market systems changed during Covid-19 will be critically important.
As it interrupts supply chains and halts transport, the COVID-19 pandemic is exposing weaknesses in the resilience of market systems across the globe. This is true for the Nigerian maize market, which lays bare the need to strengthen market systems for post-pandemic recovery.
On March 30, the Nigerian government instituted a lockdown of the capital of Abuja and Lagos and Ogun states to contain the spread of new COVID-19 cases, and several other states also opted for various levels of lockdown. The restrictions on mobility and trade placed immense pressure on the country’s domestic production, which had already seen increased demand and prices due to the government’s reduction of imported cereals.
The pandemic also coincided with the crop planting period, contributing to the rise in input and maize costs by roughly 40 percent, according to the Nigerian Agricultural Policy Project. The immediate rise in key staple prices, which has implications for this season’s harvest and foreseeable impacts on GDP and poverty in Nigeria, highlight the maize market system’s lack of resilience to shocks.
Market systems resilience and proactivity
Market systems research and development interventions in the past few decades have attempted to unpack and address ways to bolster livelihood outcomes. The Market Systems Resilience framework released by USAID’s Bureau of Food Security in late 2018 went a step further to explore structural and behavioral characteristics of how markets do or don’t transform to shocks, including unforeseen events such as COVID-19.
The authors argue that markets range from reactive (inhibitive) to proactive (enabling) in their ability to absorb, adapt or transform in the face of shocks and stresses. They also make a distinction between fast-moving (e.g. prices and supply) and slow-moving (system-level) variables and point out that most development interventions focus on the fast-moving variables directly impacted by a shock like COVID-19.
However, there is a need to find ways to address slow-moving variables, such as market structure and gender norms, that can transform market systems in the long run.
A look at the Nigerian maize market
In 2018, the Nigeria Agriculture Policy Project undertook a survey of 1,400 maize traders to understand the structure of the maize value chain. They found that the rural-urban maize supply chain in Nigeria can be visualized as a massive hourglass, with tens of millions of small farmers growing maize, 100 million people buying maize and 10,000 urban maize traders and a well-developed third-party logistics services and warehouse rental market that guide market trends. The study found that farmers not participating in outgrower schemes receive practically no advances from traders at the onset of the planting season, thus most of the risk is concentrated with smallholder growers at the top of the hourglass.
In recent years, the Nigerian government has tried to rectify some of the issues in the maize market, in which power is concentrated in the hands of traders, informal rules prevail, there’s limited diversity and competition, and short-term margins drive decision making. These factors set the maize market up to be reactive — which is why it was hard hit by COVID-19.
Shortened market hours and restrictions on transit between states during the pandemic shutdown had a direct impact on various components of the maize value chain, including the production of poultry and fish feed. In rural areas, input costs for maize farmers increased. Poultry producers faced shortfalls due to logistics constraints. A range of actors such as food stall retailers, small shops, rural and urban wholesalers, trucking businesses, logistics firms and warehouse companies were widely impacted. This led to a substantial drop in income for those who depend on these industries for their livelihoods, not to mention inflation of food prices for a wide swath of Nigerians.
Addressing slow-moving variables
Given the example of the Nigeria maize value chain and other similar cases throughout the Global South, how can development actors impact slow-moving variables to make market systems more resilient and advance toward more proactive behavior?
This is a question that Creative hopes to address in the West Africa Trade and Investment Hub. In collaboration with USAID and private sector agribusinesses, the project has redirected a portion of USAID’s $60 million co-investment fund to bolster the local food supply and ensure that businesses working with smallholder farmers help them access key inputs and pre-financing, given the impacts of COVID-19 on farmer income, supply chains and other constraints. This contributes to building a proactive market system that is adaptable to future risk by developing new business models, norms and incentives among market actors.
We will be looking to enhance market behaviors that decentralize power of traders, potentially through technology and enhanced farmer networks, improved competition, and increased access to data that allows farmers and consumers to make better decisions. Most importantly, our ability to directly co-invest with innovating U.S. and Nigerian agribusinesses to adapt their business models in the maize, soy, rice, cowpea and aquaculture value chains, deliver value for customers and suppliers, and challenge gender norms within their own operations and broader supply chains will help make these market systems more resilient to shocks from future crises like COVID-19.
By the Nguriza Nshore team
Feed the Future Nguriza Nshore is applying systemic lenses and tactics to shift the orientation of the financial services market system in Rwanda. Nguriza Nshore is focusing on two major shifts in the financial services market system. The first is shifting the orientation of the banking and microfinance service providers toward the SME segment. This shift requires banks and micro-finance service providers to shift their operations and product offerings to accommodate the specific needs of SMEs and the SME segment. The second is shifting the overall balance of enterprise finance away from banks and microfinance service providers and toward private capital that can more effectively serve the growth capital needs of Rwandan entrepreneurs.
While most financial services projects focus only on bank or loan-based financing for SMEs, Feed the Future Rwanda Nguriza Nshore (Nguriza Nshore), a project funded by the United States Agency for International Development (USAID), is putting equal weight on other types of financial services. In particular, Nguriza Nshore is supporting the emergence of more robust private capital options. Private capital is when an organization or investor, such as angel investors, investment funds, impact investors, etc., use their private capital to invest in selected SMEs/firms. While traditional lending organizations make a margin from the difference between the cost of lending (including the cost of the funds lent) and the interest and fees charged to the borrowing SMEs, private capital investors tend to make revenue or a return through a share of the benefits in firm performance. Typically, this occurs through the value of the firm increasing over time, of which the investor owns a portion (i.e., shares in the firm/SME or equity).
In Rwanda, as in many developing countries, the perceptions, cultural norms and mechanisms that allow for private capital to emerge are nascent, making such investments rare. As a result, very few Rwandan SMEs or corporations access private capital financing beyond informal friends and family networks. At the same time, systemic shifts in support of private capital such as high levels of liquidity, high growth rates, shifting norms around ownership, etc. are emerging quickly. The pace and process of change in favor of private capital has been uncertain at times, which is why Nguriza Nshore is working to catalyze the emergence of private capital that is inclusive, fair, and merit based.
Nguriza Nshore is supporting initial transactions that can form an attractive demonstration to both SMEs and investors alike. Given that both SMEs and investors are limited in their understanding of risks and potential benefits of private capital in a Rwandan SME context, Nguriza Nshore has had to actively engage on both sides. For example, most SMEs in Rwanda are driven by short-term demands for cash including personal/family demands, which as a result encourage SMEs to act in ways that can limit their growth and value to an investor. Therefore, a vital issue is to help SMEs realize that they often need to restructure for longer-term growth. This encompasses many aspects of their business — customer orientation, brand value, alliances, data management, decision-making, etc., — but most important is how they manage their human capital. Finding and supporting SMEs that are hungry for growth and demonstrate an openness to partner with investors to achieve more than they can on their own, is of utmost importance to an SME becoming investment-ready.
While finding SMEs with the right mindset is essential, it is not sufficient. Additionally, there are many technical and practice performance improvements required for an SME to become investment-ready. Nguriza Nshore seeks to build the ability of local market actors to deliver needed technical assistance, but as the overall ecosystems are still evolving, Nguriza Nshore often has to step in to fill technical assistance gaps and generate a flow of viable transactions.
Dedicated technical assistance in areas that prepare SMEs to be investment-ready are crucial. Most SMEs are in critical need of improving business management, building a sustainable business model and ensuring value creation. Nguriza Nshore works with several business transaction advisors, who normally have a pipeline of business opportunities looking for financing. Once the businesses are registered with transaction advisors, and an assessment of their investment readiness or lack thereof is established, Nguriza Nshore comes in to provide the necessary technical support to close the deal. It should be noted that it is only those businesses that are judged to be close to concluding the deal that are facilitated and enabled to be investment-ready, as it is critical to catalyzing systemic change that early investments are successful and provide an attractive demonstration, building momentum for more SMEs, investors and technical advisors to enter the private capital market.
By the Nguriza Nshore team
The financial systems change wheel was developed to help the Feed the Future Nguriza Nshore staff track a more comprehensive set of factors influencing how the financial service market systems functions. Through the use of the wheel, the Nguriza Nshore team has been able to see how the EDP’s implementation is more important for increasing the inclusive growth potential of entrepreneurship in Rwanda than having a perfect written policy that never gets implemented effectively. Further, the wheel is helping the Nguriza Nshore team see how changing the banking and microfinance services also entails other interconnected systems. The wheel is also helping the Nguriza Nshore team track its progress towards systemic change.
Feed the Future Rwanda Nguriza Nshore (Nguriza Nshore), a project funded by the United States Agency for International Development (USAID), has been grounded in systems thinking from the start. The three project components, for example, are also interconnected and interdependent. Credit based finance is important, but not sufficient to catalyze a growing inclusive economy, so mobilizing private capital is also essential. At the same time, bank finance and private capital cannot effectively allocate financial resources if the rule of law and policy environment remain uncertain or highly biased against clear, consistent, and transparent rules of the game.
The Nguriza Nshore team realized the importance of the interconnectedness but did not have a way to define and highlight interconnectedness. As a result, the team, in concert with EcoVentures International, developed a financial services system change wheel (finance wheel). Based on the agricultural market system change wheel published by USAID, the finance wheel provides a graphic representation of the system and its interconnectedness. The team is using the tool to track their activities against wider systemic forces and dynamics allowing the team to adapt more effectively to emergent threats and opportunities. The finance wheel also provides a normative pathway to self-reliance that the team can use to gauge where momentum is growing and where change has stalled or needs more support. The combination of defining interconnectedness and a normative pathway gives the team an important tool in managing how best to work in and across their components.
View a draft of the Financial Services Market Systems Change Wheel below.
Written by ACDI/VOCA Transforming Market Systems Activity in Honduras
The blog focuses on some of the more near-term adaptations that firms have done/are doing to better weather the challenges resulting from covid-19. Certainly, shifting to known channels that are still operational, including on-line channels, is important, but from a systemic resilience perspective it only scratches the surface of what will be important to learn. It will be interesting to hear what TMS learns about connectivity, power and diversity and how these factors affect firm/industry resilience. For example, what supporting services are central to being able to adapt, especially to channels that were previously unknow to the firm. An additional important question for TMS would be, how does a shock also presents an opportunity for systemic change. For example, it could be assumed that connected and powerful firms will weather this shock better, which is likely to result in those firms coming out of covid-19 in a substantially improved competitive position. If this is a real possibility, should projects think more systemically about which firms should get assistance, focusing more on firms that could/would catalyze substantial shifts in the competitive landscape coming out the shock? TMS is at the forefront of thinking systemically and it exciting what they will learn as their research continues.
With the ongoing COVID-19 crisis, people and businesses around the world are facing unprecedented challenges. This is particularly evident in countries like Honduras that have fewer resources to cope with and adapt to the shock. For many businesses, social distancing measures mean lost revenues and forced decisions about how and whether to continue operations and retain employees.
In Honduras, compelling data gathered by the USAID/Honduras Transforming Market Systems (TMS) Activity shows how well businesses are adapting to these challenges. The data was gathered through a survey of 1,178 enterprises from 16 out of the 18 departments in Honduras and across 17 economic activities. The survey demonstrated that the resilience of a business was closely aligned with their willingness to adapt their business model. This has widespread implications for the evidence-based decisions that public organizations, entrepreneurs, and the government will need to take to mitigate losses and support recovery.
Coping With Distribution Chain Disruptions
The TMS Activity is working closely with Honduran businesses, their chambers of commerce, and the government to identify solutions to the unique problems stemming from the COVID-19 crisis. Our approach involves looking at the entire value chain to determine what changes, improvements, and relationships can be initiated that will affect not only the large distributors in Honduras but also the small farmers at the beginning of the chain. This means acting and adapting quickly to develop interventions that will help businesses be more efficient and well-positioned to expand by connecting distribution channels and offering relevant and timely technical training.
Earlier this year, with support from the TMS Activity, JJ-Agro inaugurated the first hydroponic strawberry production unit in Honduras through a $200,000 investment in greenhouses. JJ-Agro is a major supplier of potato, cabbage, broccoli, and cauliflower for Walmart and several Honduran supermarkets. The planting of 54,000 strawberry mother plants offered export potential and the opportunity to diversify revenue streams. However, shortly after the first strawberry harvest, the COVID-19 crisis struck, and export channels were blocked.
KEY TAKEAWAY 1: Manufacturers in Honduras are more likely to be affected and less able to cope with the impacts of COVID-19.
To quickly adapt to the crisis, the TMS Activity helped JJ-Agro rapidly diversify its distribution channels. We linked JJ Agro with a Tegucigalpa-based produce delivery service, Pyflor, and a San Pedro Sula-based produce delivery service, Yojoa Trading Company, to sell their first harvest of strawberries. Over the last two weeks, JJ-Agro was able to sell 3,000 pounds of strawberries through these services, avoiding product and job losses and opening relationships and growth pathways.
“Our clients are extremely satisfied with our product and we are now sold out of our first batch of strawberries. We are launching our first marketing campaign this week, and everything is thanks to the work and support of [the TMS Activity].” — a JJ-AGRO manager
KEY TAKEAWAY 2: Transformative resilience capacities, such as the capacity to find new buyers, are linked to the level of confidence a Honduran business has to recover from COVID-19.
Overcoming Disruptions Via E-Commerce
Yojoa Trading Company, one of the services that offered a lifeline to JJ-Agro, also received support from the TMS Activity when they launched their online sales platform a month ago. The company began using the electronic payment platform of another TMS Activity partner, Sube Latinoamérica. Sube Latinoamérica provides an integrated e-commerce solution for small- and medium-sized businesses. To help businesses learn how to transact online, Sube Latinoamérica provides webinars, workshops, access to logistics carriers nationwide, and ongoing consultation services as part of its service offer.
KEY TAKEAWAY 3: Honduran businesses selling online cope better with the COVID-19 crisis. An estimated 19.5 percent of businesses surveyed are changing their business models to sell products and services online.
Thanks to online sales and new home delivery services, Yojoa Trading Company experienced rapid growth in just 10 days. The company can now sell and deliver fresh produce directly to consumers, bypassing intermediaries, such as grocery stores, while still offering fair prices and reducing food insecurity in the two largest Honduran cities. Given the observed success of these new and improved distribution models, other businesses, such as Pyflor, are also considering expansion into new e-commerce channels through Sube Latinoamérica.
KEY TAKEAWAY 4: Commerce enterprises in Honduras, especially those using online selling platforms, are more resilient to the COVID-19 crisis.
Transforming Business Models
This story is more than anecdotal; it represents the type and profile of businesses that are statistically coping better with the negative impacts of COVID-19. More than half of the businesses surveyed are proactively changing to their business models to adapt to the COVID-19 situation. They are building their resilience capacities by taking sales online, diversifying their products and services, and implementing strategies to operate in a post-COVID19 reality. As a result, these enterprises are losing fewer sales and laying off fewer staff.
The TMS Activity is paving the way for these businesses by applying our systemic, market-based approaches to reduce the barriers they face in adopting e-commerce solutions. We are facilitating new patterns of supply chain distribution and supporting businesses as they test and validate new products, services, and business models so that these outliers may become the new norm.
Honduras, like most countries, will face uncertainty and difficulty in the months and years ahead. But, with support from the TMS Activity and its market systems approach to building business resiliency, many Honduran enterprises will weather the storm and be prepared to hit the ground running when the clouds roll away.
Access the USAID/Honduras TMS Activity's COVID-19 Business Resilience Analysis via the link below.
The MSDHub Blog Series is authored by respected implementers and donors of market systems projects globally.