By Melissa Scudo Gasmi, Eileen Hoffman, Tracy Shanks (Chemonics)
In the following post on private sector engagement, the authors provide three examples of working with private sector actors. In the first intervention, a project works with a segment of the tourism industry in Jordan to help them connect to international marketing platforms. In the second, a project works with a specific business on how to commercialize a new product related to reducing aflatoxins in crops, and in the third, a project facilitates public-private partnerships related to entrepreneurial support services. While all the examples give some good ideas on ways to work with private sector, from a systems perspective there are important questions that practitioners should be asking and testing when applying any of these tactics.
Donor agencies, such as the U.S. Agency for International Development and the U.K. Department for International Development, have made private sector engagement, or PSE, a key element of their development strategies. Being more intentional about including the private sector in development is good news. Over the years, we in the development community have come to recognize that the success of the private sector depends on strong development outcomes. Both parties succeed when there is a healthy, well-educated, and skilled workforce, efficient and productive supply chains, better business environments, and stronger economies that drive more domestic commerce and international trade.
At Chemonics, we have learned there is value and opportunity for PSE in any other sector and at any stage of development. In the past, PSE often occurred once activities had been fully designed. Now, the private sector is active from the design and establishment of shared objectives to implementation and evaluation of outcomes to ensure we’re achieving sustainable results for all.
So what is the implementers’ role today? We believe our role is to bring partners together find ideas based on shared risk and shared reward, create sustainable and long-term impact, and test and scale up solutions. There is no one-size-fits-all approach to do this, but these are three PSE models that we have tried and tested in different parts of the world and with which we have seen some success.
The traditional model: Finding the sweet spot
Worldwide, travel and tourism is one of the largest economic sectors, supporting 1 in 10 jobs and generating more than 10% of global GDP. In the last five years, 1 in 5 new jobs were created in the tourism sector. For lower-income countries, this represents a significant opportunity for job creation and export growth, particularly among local businesses that provide services where large multinationals have little presence.
In Jordan, local small- and medium-sized hospitality companies outside of the capital of Amman struggled to attract tourists and grow their businesses. Traditional marketing techniques such as word-of-mouth, printed brochures, and basic websites were not generating enough growth. As the implementer of a tourism development program, we worked with the Jordan Tourism Board to increase sales and jobs in the industry. We recognized the untapped potential of local businesses and knew it could be realized if the tourism industry could successfully reach an international audience. We engaged the world’s largest travel technology companies, TripAdvisor and Expedia, to help identify solutions that would give the websites with more global tourism offerings, provide small Jordanian hospitality businesses with access to global tourists, and contribute to our development goals.
As the implementing partner, we facilitated collaboration between the travel technology companies and the Jordan Tourism Board. Through these partnerships, the Jordan Tourism Board was able to take steps to reach a new, broader audience of international travelers, showcasing what Jordan has to offer as a travel destination. Activities included Expedia holding a half-day workshop in Amman to teach local hospitality businesses how to create effective accounts. Additionally, TripAdvisor signed on to an agreement with the Jordan Tourism Board to provide support valued at $250,000.
The private sector direct model: Scaling innovations developed through research institutions
Aflatoxins — toxins produced by soil fungi that can infect commodity crops — threaten food security, health, and trade in many low- and middle-income countries, particularly in Africa. They contaminate food supply chains, and aflatoxin management has cost an estimated $1 billion per year in just the Philippines, Thailand, and Indonesia. They can also cause stunting in children and lead to liver cancer. After more than a decade of research, the International Institute of Tropical Agriculture developed Aflasafe, a natural product that combats aflatoxins. However, getting this product to the market was another challenge.
The gap between a scientific discovery and its commercialization is known as the innovation “valley of death,” a nod to common hurdles that stand between innovative solutions and practical scalability. The problem facing Aflasafe’s commercialization is that the product does not have a direct impact on agricultural yields. And, the negative effects of aflatoxins in the body can take years to manifest, resulting in very low awareness among farmers because they are often invisible to the naked eye. We knew commercialization of Aflasafe depended on a market-driven approach and leveraging private sector assets, so IITA set up the Aflasafe Technology Transfer and Commercialization Project and implemented it in partnership with Chemonics and Dalberg Advisors.
To reach the necessary number of farmers and ensure Aflasafe would be viable, ATTC developed a five-phase commercialization methodology for taking science to scale, focused on analyzing and presenting market analysis to private investors and business opportunities to manufacturers. Since November 2015, ATTC has seen six market assessment strategies, four technology transfer agreement licenses, two distribution licenses, and three actively operational manufacturing plants. This commercialization methodology can be adapted by research institutions or donors seeking to leverage the resources of private business to get new innovations on store shelves and in the hands of users who will benefit.
. See a larger version of the image here. Image by: Chemonics
The multiple partner/complex model
Private sector growth in LMICs is often stymied by a workforce with insufficient skills and technical training, resulting in youths and entrepreneurs unprepared for today’s tech-driven economy. Local companies are challenged to use modern technology solutions that would help them compete in lucrative markets, and global technology companies’ products are not utilized to their full potential in these markets.
To tackle these challenges in Moldova, we applied a collaboration model known in Europe as the “golden triangle,” bringing together industry, government, and academia to develop innovation centers based on the needs of the private sector. Multinational technology company Microsoft approached the development community with an interest in building an information technology training center in Moldova. We took the initial concept and evolved it through co-creation with Microsoft, IBM, the Technical University of Moldova, and the Moldovan Association of Information and Communications Technology Companies into an ICT Center of Excellence.
Using a similar co-creation process, we have since transformed business ideas from numerous companies into six other university-based excellence centers, which include shared learning spaces, coworking and startup zones, globally recognized training programs for cutting-edge and in-demand technologies, and collaborative production facilities with equipment, tools, and software for rapid prototyping.
As the development implementer, we identified the shared business and development interests among all the partners. We convened private sector companies with similar business needs and ideas as well as academic institutions with shared technical interests and long-term commitments to training and education. Global and local companies contributed technical know-how, software, hardware, training programs, and trainers to ensure the global relevance and quality of services. Universities provided physical spaces and long-term management, while local private sector associations provided business planning, management systems and support, and continual input on private sector business needs to ensure sustainability.
Meanwhile, donor, university, and industry association representatives serve on the centers’ boards of directors for balanced oversight. Having strong, credible partners and using proven global approaches convinced the Moldovan government that these centers would be well-funded and managed and would achieve both business and development objectives, ensuring long-term critical government support.
Through the centers, 180 teams and startups have benefited from acceleration programs in technology, fashion, and digital business. Some 34,000 youths and professionals have developed in-demand technical skills in coding, cybersecurity, the “internet of things,” electronics, fashion pattern-making, design, and robotics. We project that, by the end of 2020, the centers will have improved the skills of 40,000 youths.
We know that doing good and doing well are not mutually exclusive. If we are to make achieving the Sustainable Development Goals profitable for the private sector, we must understand the needs and strengths of all partners and design projects on this foundation of shared value to transform development outcomes. Whether the role of the development community is to identify opportunities, convene stakeholders, facilitate partnerships, provide technical guidance, or measure impact, development practitioners should adapt their involvement according to unique circumstances and opportunities. Only then can we facilitate the right partnerships that will bridge private sector interests and development goals.
Melissa Scudo Gasmi
By Marcus Jenal, Partner, Mesopartner
For most practitioners, the hardest part about applying systems thinking is shifting how they frame whatever problem they are trying to address. As Marcus describes in his blog, many practitioners think about their main challenge as something static, requiring a specific technical fix, or as Marcus suggests, a band-aid (plaster). While technical fixes are certainly a component of most development challenges, the fundamental question is always around why the known solution does not resonate within the system. This post provides a thoughtful way of explaining the importance of embracing complexity in development, starting with changing the key questions we ask and the frameworks through which we interpret these development challenges.
Market systems resilience connects systemic change and sustainability
Resilience was one of the central themes at the 2019 Market Systems Symposium in Cape Town, where I recently had the pleasure to interview Kristin O’Planick, for a Systemic Insight Podcast (subscribe wherever you download podcasts). Kristin spoke about a new framework for assessing market systems resilience being designed by USAID.
The conversation about market system resilience brings together several threads I have worked in my professional career, particularly on measuring systemic change and sustainability. The perspective I offer here contrasts markedly with some recent BEAM Blogs (Why can’t we measure systemic change? and How can we fix the biggest sustainability problem facing development?).
Systemic change is not about fixing current problems
I want to challenge one dominant view in our field which seems to conceptualise market systems development as being about finding fixes to specific problems in the system (an underperforming function or rule) and then scaling these fixes out to reach large numbers of beneficiaries. This happens first through project partners buying into that fix, then scaling it out, and then through other market actors crowding in and copying the fix.
In my opinion this way of thinking about systemic change is akin to putting plasters (band-aids) on system wounds, not trusting or believing in the ability of the body to heal itself. An alternative view of systemic change, inspired by resilience, would be more about enabling the body to heal itself. This does not mean that we don’t need plasters at all; they can help the body to heal in acute cases. But without building up the healing capacity, we will never be able to step back from the role of first-aider. The interesting thing is that in our daily lives, we seem to understand this much better than in our work lives (see my recent blog - We seem to understand complexity in life – why can we not in our work?)
A better way of thinking about systemic change was described in depth by Shawn Cunningham and I in Rethinking Systemic Change for the BEAM Exchange in 2016. We concluded that "Systemic change is most likely to be achieved when influential actors or networks of actors become aware of how change happens, and their role in realising the evolutionary potential of the economy. These influential actors need to develop the capability to engage in, collectively discover and continuously shape their institutional landscape."
In other words, what we strive to achieve when using the MSD approach is not merely to fix some current problems, but to build the capability for continuous learning and development into the market system. This is in line with Carl Folke’s definition of resilience: "Resilience is about cultivating the capacity to sustain development in the face of expected and surprising change and diverse pathways of development and potential thresholds between them” (Folke, 2016)
Sustainability as adaptive capacity
This brings us to the next concept that resilience helps us to reframe sustainability. To use the same metaphor as above, current views on sustainability seem very much about trying to ensure that the plasters (band-aids) we put on stay on as long as possible. Or in other words that a fix that a project puts in place (a new business model, a new service, etc.) will be continuously provided also when the project stops funding it and, ideally, forever. Is that really what we should be after? With dynamic, shifting economies, this particular solution might not be relevant anymore in a couple of years, what then? An economy is dynamic and evolving. So why not equip market actors with means to navigate this dynamic landscape, rather than to put in place a solution for a current problem? That, for me, would be a truly sustainable form of market systems development.
Back in 2013, Lucho Osorio and I conducted an e-consultation on M&E in market systems development and one of the findings was that we should see sustainability not as how long our particular solution persists, but rather as how able the market system is to "avoid or minimize future shocks and benefit from new trends whilst staying inclusive, productive and efficient” (Osorio-Cortes and Jenal, 2013). We called this ‘stainability as adaptability’.
Daniel Christian Wahl in his book Designing Regenerative Cultures describes sustainability as a learning journey: “Sustainability is not a fixed state that can be achieved and then maintained forever after. Sustainability is a dynamic process of co-evolution and a community-based process of continuous conversation and learning how to participate appropriately in the constantly transforming life-sustaining process that we are part of and that our future depends upon.”
Sustainability as a concept also has an important role to play in its original meaning: how we can live on this planet in a way so future generations will also be able to live happy and fulfilled lives. That is a whole different challenge, which is, I believe, not taken into account enough in market systems development. The big question there is how we balance social, environmental and economic sustainability, without seeing these as trade-offs.
What I don’t want to imply in this article is that programmes are not doing any of this at the moment. They are. Yet the conceptual discussion about systemic change and sustainability seems to be dominated by first-aiders. I think it is important to put more emphasis on a system’s resilience and give it priority over fixing current problems. All in all, I would say that market systems resilience is a helpful concept when thinking about our legacy as development actors both with regards to systemic change and sustainability.
Gender and market systems development: Why we struggle and what can be done to tackle common challenges
By Giulia Salmaso, Senior Associate, Economic Growth, Palladium
In this post Giulia highlights the challenge of gender inequality in market systems approaches. As Giulia suggests, the issue of gender is often framed from a social or moral perspective. For many practitioners, this way of contextualizing the gender issue has created a type of push-back resulting in many projects deciding to think of gender as a secondary consideration. At the same time, from a more objective systems thinking perspective, the idea of restricting 50% (or more) of the human capital in a social system from engaging in developing and testing solutions to emergent risks and opportunities is a real limitation on a market system. Especially from complex systems understanding, it is essential that a market system actively engage as many people – regardless of gender – as possible to increase the likelihood of generating value added solutions for a society. In this context, gender inequities are not secondary, but are of primary concern.
It’s no news that we need gender equality to achieve sustainable growth and eradicate poverty. Yet, ‘gender’ is often found only at the end of reports, a small paragraph among the many ‘cross-cutting issues’, an add-on at best. I brainstormed about why this is the case at the Market System Symposium, earlier this year in Cape Town, with a room filled with practitioners who haven’t lost determination. We discussed issues ranging from difficulties in mainstreaming gender to more controversial aspects such as when and how to target women’s specific constraints. Overall, we all brought challenges to the table, but also many examples of how market systems development can be effective in redressing imbalances to empower women and contribute to inclusive impact.
Here are some takeaways.
Gender, Women’s Economic Empowerment and Market Systems Development: a (mis)perception that we better fix
It seems that market systems development (MSD) programmes are confronted with a significant push back when it comes to Women’s Economic Empowerment (WEE) or worse gender. Eyes starts to roll, people yawn, doors could even slam shut – brace yourself, it isn’t going to be easy. It appears to be grounded in the strong perception that women’s (economic) empowerment is ‘socially’ driven and has nothing to do with markets, and that including women’s constraints in the market diagnosis and intervention design (whether it’s mainstreamed or targeted) would shift the programme focus away from improving productivity and increasing incomes. When ‘gender’ and WEE come with too much ‘social’ baggage simply using a different language helps. Some of us found it very effective to discuss with staff about women and men customers, producers, employers and employees; how women and men are currently engaging (or not) in market systems and what products and services women and men require, afford, prefer and can access.
The deal with Mainstreaming: It starts at the start (and ends at the end) …
Gender mainstreaming means integrating a gender perspective into the preparation, design, implementation, and monitoring and evaluation of projects, with a view to promoting equality between women and men and addressing discrimination. While most programmes mainstream gender in their measurement systems for reporting purposes, gender mainstreaming is generally patchier across the rest of the programme/intervention cycle. Essentially, it seems that although we often ‘disaggregate impact’ we miss mainstreaming in the first steps and hence miss out on generating inclusive results. The two steps of the intervention cycle that seems the most neglected are:
… It generally accommodates women’s constraints but does not address them – so beware …
Acknowledging that women face additional constraints allows programmes to mainstream that understanding and respond to those constraints. For instance, when arranging a training or a marketing event, programmes can recognise that women’s lack of mobility and care duties often prevent them from participating in such events. As a result, the programme should select a venue and timing that accommodates the needs of women. Mainstreaming in this sense doesn’t necessarily address the root causes of gender inequality nor targets women’s constraints, but allows programmes to be responsive, facilitate broader, more inclusive, reach and increase the possibility that both men and women will benefit from interventions. Mainstreaming tactics, which often are essentially about ‘opening and leaving the door open’, also help when women are ‘invisible’ players. Indeed, by mainstreaming one can challenge gender stereotypes which lead the private sector as well as programmes into believing that women don’t buy or sell a specific product or are not involved in a certain activity and therefore should not be engaged.
… it is simply not enough
Unpaid care, lack of mobility, limited decision-making power and control over resources are among the challenges faced by women across countries and sectors, which systematically prevent them from engaging effectively in market systems and benefitting from growth. Whether we are attempting to improve market systems in agriculture, manufacturing, housing, health or education, chances are extremely high that gender inequality, if unaddressed, will affect the ability of programmes to improve the performance of market systems sustainably and generate enduring impact. Hence, the need to act in tandem – beyond mainstreaming there is a need for programmes to design and implement interventions that target women’s constraints.
Debunking (more) myths about WEE and MSD – the (not so) hidden incentives of market actors to address gender inequality
MSD programmes tend to refrain from designing interventions targeted at addressing women’s constraints under the assumption that market actors lack the incentives to do so, even with programmatic support. However, it is precisely the systemic nature of market systems approaches that allows programmes to understand women’s constraints as part of the wider market systems, and identify which actors have the incentives to address them (with the right support). Unpaid care, lack of mobility, low decision-making authority, lack of access to information etc. translate into untapped labour, absenteeism, high staff turnover, unreached customers, sub-optimal supply and the list continues. This means that the business case is strong for the private sector to find solutions to constraints faced by women. Similarly, these constraints reflect also government failures, meaning that public actors have strong incentives (and mandates) to address gender inequality. Facilitation approaches are proving more and more effective, but somehow the good news still goes unnoticed. Labour saving technologies, the provision of on-site nurseries at the workplace or discounts for workers to access public or private-run nursery facilities, as well as catering for transportation needs are just some examples of how market systems development can effectively contribute to women’s empowerment while improving the productivity of market actors. Nonetheless, programmes should acknowledge that these types of interventions are mainly effective in addressing access domains of women’s empowerment, leaving the agency gap open.
The “agency” beast and why it makes us feel uncomfortable
As it stands, women’s agency constraints, such as low decision-making power, low control over resources and incomes, are perhaps for the bravest and the most farsighted. If access dimensions of women’s empowerment perfectly fit with facilitation approaches, as an implementer I appreciate how agency can be a (different) beast. Undoubtably, addressing agency likely requires the quintessential market systems development practitioner to step out of her/his comfort zone i.e. the private sector, the high investment leverage, the projectable results at the end of the year. How so? First, actors that generally have immediate incentives and capacity to address women’s constraints are often actors that MSD programme engage with little or even look at with suspicion – the civil society, community organisations or local governments at best. Second, the nature of these actors, implies that they are unlikely to be able to commit financially; yet, while investment leverage is of critical importance for MSD programmes, it does not supersede all performance metrics. Third, it takes time and the move from outputs to outcomes to impact requires a more patient and complex pathway – which means programmes must understand and target women’s agency from the onset and be able to revisit interventions as results emerge. Once again, the beauty of the market systems development approach is that it embeds great flexibility and creativity – all of the above is possible.
In conclusion – it just needs to be done (and done MUCH better)
These takeaways tell a simple message – the market systems development approach is perfectly suitable to contribute to redressing gender inequality. Although challenges do exist, most seem to be rooted in the status quo and the perception that market systems development programmes can neglect gender and disregard their mandate (as well as the business case) to improve the empowerment of women. And finally, “Well begun is half done”; programmes where gender is part of the conversation from day one and part of everybody’s responsibility are programmes with the biggest potential to contribute to transformational impact, empower women and help rebalance gender inequality. Course correction is also possible though – if you are interested to read more about how programmes can improve their impact on WEE by tackling common challenges have a look here.
About the Author
Giulia is an international development practitioner with a strong background in economics and expertise in the fields of market systems development, monitoring and result measurement and women’s economic empowerment. She has extensive field-based experience managing, implementing and evaluating private sector development programmes, in programme reporting and building the capacity of local staff.
Evidence of the effectiveness of the MSD approach is not strong enough - what can we do to change this?
By Jonathan Mitchell, the Oxford Policy Management portfolio leader for financial and private sector development, and project director for the Decision Support Unit of the DFID private sector development programme in the Democratic Republic of the Congo.
Note that the views and opinions expressed in this article are those of the author and do not necessarily represent those of his employers, donor organisations, or the programmes he works with.
Jonathan’s blog post highlights some important points and insights surrounding the question of the effectiveness of market systems thinking approaches. In addition to these relevant insights from Jonathan, I would add that the whole discussion of evidence also has to recognize what is it that we want to learn or evaluate. Jonathan touches on this when he points out that market systems projects have different objectives from more traditional project approaches. Market systems approaches also frame the challenge very differently from traditional expert-driven technical fix approaches in the understanding that real and durable change has to come from within the local system, which has important implications on issues like attribution. Maybe the most important takeaway from Jonathan’s blog post that the development industry has to struggle with is the separation of the donor political economies’ realities with honest, objective debate and learning about the role and effectiveness of international development.
In Hans Christian Andersen’s story The Emperor’s New Clothes, the monarch parades before his subjects in his new regalia and no one dares point out that he’s naked. It takes a child in the crowd to call out the charade.
Looking at barriers to effective learning at the Market Systems Symposium recently, we took inspiration from Andersen’s story. Cultural and structural obstacles that frustrate meaningful learning develop over time in any field. Every one of us involved in delivering MSD programmes needs to put ourselves in the place of the child in the crowd from time to time.
No, we do not think that the market systems approach is a charade. But the evidence base for MSD approach effectiveness is not strong enough. We can undoubtedly do better, but only if we begin to ‘call out’ some of the entrenched issues that are hiding in plain sight.
Evidence matters because the market systems approach is increasingly visible in donor-funded private sector development, and also becoming significant in non-traditional social development sectors such as water and sanitation, health and education.
In our discussions we asked ourselves two key questions:
Do we have robust impact evidence from which to learn?
On the face of it, the suggestion that there is a lack of evidence of impact about the effectiveness of market systems approaches is absurd. Since the first explicitly market systems project, the FinMark Trust launched by DFID in South Africa in 2001, the BEAM Exchange Evidence Map has collected over 150 evidence documents on market systems interventions across 41 countries. Each of these documents reflects a large volume of monitoring data.
The problem is not with the quantity of evidence, but rather with its quality. Few of these analyses meet the minimum thresholds of evaluation rigour. BEAM’s Evidence Review in 2019 reported clear signs of publication bias, and we cannot learn from mistakes that we hide. In addition, most of the evidence was commissioned by implementation teams – so not strictly independent. Few of the evidence base documents are ex-post impact evaluations, which is the most reliable way to assess the overall performance of market systems programmes. By 2019 only 14 percent of the Evidence Map comprised impact evaluations and external reviews.
So it appears not much has changed since Ruffer and Wach’s review of M4P programme evaluations in 2013 reported that ‘evaluations reviewed here are generally weak’ in terms of considering systemic changes, data quality, triangulation practices, use of theories of change and consistency of units.
Clearly there is a problem here. But do market systems projects perform any differently in this regard to other similarly complex development sectors? Part of the problem is obviously structural to the aid sector generally. The need to show that taxpayers’ money is being spent effectively generally does not sit well alongside a nuanced reporting of a complicated picture. In addition, the recipients of aid do not generally complain about poor services.
However, we should recognise that monitoring the impact of a market systems programme is harder than, say, building a school with aid funds. Market systems projects deliver, in a tangible sense, very little beyond diagnosis, facilitation and monitoring. Results are delivered (or not) by entrepreneurs adopting business innovations or public officials changing regulations, over whom the project has limited direct control. Getting accurate impact evidence from market systems projects is even harder than for other types of aid projects.
Improving accuracy is partly, therefore, a technical issue of applying counterfactuals to evaluations; taking the attribution of results more seriously; and undertaking ex-post evaluations. It also is related to a commitment to "serious monitoring" (internal, longitudinal etc.) and a decade of effort and experience has gone into developing the DCED’s Standard for Results Measurement which includes independent auditing of programmes’ results measurement systems.
However, in my view, the root of the problem is located in incentive frameworks created by the political economy of aid. Under pressure from donors to report rapid and extremely high impact-level results, combined with light touch donor management of monitoring systems, project teams are incentivised to generate an optimistic view of their interventions. This tendency is only sharpened when payment by results modalities are used - where consultants’ payments are contingent upon the achievement of specific high-level results being achieved. The ICAI review of DFID’s private sector development work in 2014 gave an amber-red (meaning ‘performs relatively poorly’) score for its assessment of impact, linking this explicitly to the pressure to demonstrate results against measurable targets, rather than systemic change and broader growth and poverty reduction.
In short, everyone is incentivised to pretend that the Emperor is wearing beautiful clothes. I do not think this situation is inevitable. We need inspirational people to create the space and environment where development practitioners are incentivised to tell the truth about the results of their interventions and to report failures as well as successes. This is not an easy task, but it is vital and it is possible
How can we learn better?
Assuming an environment is created that will generate sufficiently robust evidence to support learning, the question emerges – how can we learn better? We think this requires action at the cultural and institutional level.
Even though humans are biologically wired to learn, institutional learning in development cooperation seems to be fragmented and owned by individuals. Many stakeholders recognise the importance of building the culture of learning but struggle to put it into practice. Happily we already have a pretty good idea from experienced MSD programme managers, about how to build high-performing teams with strong learning cultures.
Donors also have a role in either promoting or inhibiting the learning culture. In general, the donor approach has been to out-source learning to consultancy firms and platforms run by external entities such as the donor-financed BEAM Exchange, DCED or MarketLinks.
These online platforms perform a useful function in that they are a repository of evidence and can synthesise and evaluate this evidence with a degree of critical oversight. However, institutionally, we need to evolve from scattered independent evaluations and ad-hoc research about market systems topics into a robust and recognised field of learning that attracts independent researchers from different backgrounds.
From this viewpoint our current repositories of knowledge and evidence are not ideal. Instead we should be looking to create an enabling environment for serious learning around market systems.
First, market systems practitioners (implementing organisations) should make effective their demand for better evidence and knowledge by being prepared to pay for it. In this way the online platforms can create a sustainable revenue stream which is independent from the pressures that come from donor funding.
Second, the distance between market system practitioner and academic worlds should be reduced. Market systems thinking has its conceptual roots in a respectable and currently vibrant academic critique of neo-liberal economics, drawing upon behavioural and evolutionary economics, and the science of complex adaptive systems. (See for example Cunningham & Jenal on systems change, or Raworth’s work on doughnut economics).
There is a window of opportunity for the market systems world to establish links with academic institutions in both donor and recipient countries in order to establish the latter as repositories of market system thinking and application. For practitioners this solution offers an institutionalisation of knowledge which the private sector cannot replace. For academic institutions, engaging with market systems practitioners will yield a rich palate of empirical case studies and the promise of funding from a new source.
In conclusion, we need to be honest with ourselves that while the Emperor has new clothes, they still look a bit threadbare at present. We all have a role to play in taking learning more seriously.
Donors should engage with politicians to nudge the incentive frameworks that they are creating away from impact-level to outcome-level results.
Implementing agencies should value their ‘results’ not just as a way to demonstrate the effectiveness of a specific aid programme but as a valuable input to a broader learning process.
And academics should recognise that the MSD approach presents their institutions with an important opportunity to apply some of the most innovative thinking in a relevant and meaningful context.
By Mike Field, Market Systems Specialist, EcoVentures International
In a previous blog on this site, “Diversity and Inclusion in Market Systems Programming,” contributed by Anoushka Boodhna and Devi Ramkissoon, the authors raised an important evidence-based discussion on why diversity and inclusiveness are central to more durable economic growth.
During many conversations around resilience and economic growth at the 2019 Market Systems Symposium, I found it useful to reframe the purpose of a market system. If you can, think of a market system as evolved social mechanisms that, when most effective (i.e., provide the greatest good for the society), can proactively manage risks, solve problems and generate more resources. The challenge when market systems are not working at their best is they often become tools of the powerful and connected to extract resources and consolidate power. So the question remains: what to do when a market system is not working effectively for the wider society? Specifically, there are three interconnected and interdependent capacities that a market system requires to effectively perform its functions for a society. Without these capacities a market system cannot effectively allocate human, financial and other resources in response to emergent risks and opportunities. These three systemic capacities include:
It is through the interdependent interactions of these three capacities that a market system can effectively allocate resources to various combinations of people and ideas that most resonate with the society, as well as an ability to define relative value between different types of risks and associated products and services. A key point here is how market systems self-organize to be responsive to consumer/societal demands by innovating ways to meet demand and add value (i.e., by mitigating, neutralizing or otherwise managing risk proactively). These dynamic allocation processes ensure enough diversity and inclusiveness are integrated into the market system to best secure the wider society’s ability to proactively manage risk and add value.
By Dun Grover, Director of Monitoring, Evaluation and Learning, Transforming Market Systems Activity (TMS) Honduras, ACDI/VOCA
In this blog, Dun highlights some important learning from his project’s efforts to apply more rigorous monitoring methods when tracking systemic change. A key point is that quantitative methods are valuable when tracking systemic change, but they have to be understood in the context of complexity. As Dun explains, there has been pushback on the use of quantitative methods when trying to monitor and learn about systemic change. While there is a valid argument against quantitative methods, the concern is more narrow and related to how many practitioners perceive such methods as providing absolute answers. For example, traditional approaches have applied such methods to come up with absolute yes and no answers related to project attribution. While we have learned that such ways of thinking are not valid from a systems thinking perspective, we also have to recognize that quantitative methods are important when applied properly. The blog lays out important considerations and insights into how to ensure quantitative methods add value when trying to gain insights into whether and how systems change.
In Cape Town, I had the opportunity to share some of my experiences working with the Honduras Transforming Market Systems Activity and our market system diagnostic – more specifically, how we were attempting to measure several aspects of market systems, including resilience. One of the points that sparked dialogue at our Symposium session was the feasibility and usefulness of quantitative methods (versus qualitative ones) to measure market systems and their attributes.
Since then, we have completed the market systems diagnostic. I encourage you to check out the dashboards and whitepaper here at http://cohep.com/sistemasdemercado/. Now that this process is complete, I’ve had the chance to reflect on the discussion from Cape Town. In addition to the interesting results which you can read about in the link, here are some of the realizations I’ve had:
Quantifying helps inform management decision making, even if those measures are less precise. I think the challenge most people bump into when attempting to quantify complex systems is that is impossible to do so with the same level of precision that we can, say, measure yields. USAID’s definition for precision states that “data should have a sufficient level of detail to permit management decision-making.” It turns out that we can measure the number of shocks experienced and the pace of recovery of enterprises across a sample of enterprises in an industry within an acceptable margin of error. Though these may be proxies for systems-level change, they are very meaningful measures that inform adaptive decision-making for the project and its stakeholders. Data analysis brought to light several hidden features of Honduran market systems, such as the impact of certain shocks of enterprise performance, that have shifted activities and generated insights that have prompted qualitative inquiry.
You should focus on the key variables and their directionality of change – you don’t need to explain it all. In statistics, R squared is the percent of variance explained by the model. 0 percent indicates the model explains none of the variance and 100 percent indicates the model explains all the variance. In modeling our data, we found relatively low R squares (note: this is not surprising for social sciences fields). Despite this, we also found 17 variables that were statistically predictive of systems performance results. These discoveries are potential levers for systems change. Although these quantitative models might not tell you whether pulling these levers will result in an 11%, 32.5% or even a 500% increase in system ‘performance’, we do have a stronger evidence base to inform our decisions around which levers to pull in which directions. Further, we know with a level of confidence that when we do, the system will materially change to produce more of the results we want now and likely into the future.
How to cross-validate to avoid overfitting your models in order to reduce errors in your predictions. In developing a statistical model, you may develop a model that fits your data perfectly but doesn’t fit in the real world and leads you to make errors in your predictions. This statistical phenomenon is called overfitting. In ‘real-life’ overfitting is akin to when we try to generalize experiences from one situation to another and mistakenly apply variables that don’t belong in our understanding. In statistical analysis it is a standard practice to use validation methods to detect and remedy such errors. One of the methods we are applying to avoid overfitting is cross-validation. To do this, we are facilitating workshops with a set of enterprises to validate the measures, identify ones which may have been mistakenly included, and, further, to identify variables which we missed that we should try to measure the next year.
Quantitative reasoning is integral to constructing knowledge of systems. A core feature of systems that doesn’t change is that our knowledge and understanding of systems must always change. Quantitative reasoning is a process and way of thinking that helps us construct knowledge about systems. Quantitative reasoning involves the collection and reinterpretation of data and subsequent revisions to models and theories based on new lines of evidence. In our market system diagnostic, we intend to adapt, drop, or replace indicators on an annual basis that do not prove statistically or materially predictive of target outcomes. The purpose of this process is to continue to improve the precision and fit of our measurement methods to Honduran market systems. Further, by engaging academia and the private sector in this process, we are strengthening a systems mindset oriented towards exploration and discovery among local stakeholders in constructing collective knowledge of Honduran market systems.
We welcome you to contribute to this process of learning and adaptation. If you have recommendations of variables to include in the 2019 diagnostic or methodologies to model the data, please send them to firstname.lastname@example.org or email@example.com. Please include any evidence and sources as to why this contribution can help us to better explain Honduras’s market system performance.
Co-Authored by Anoushka Boodhna, Consultant, EcoVentures International &
Devi Ramkissoon, Acting Division Chief, USAID
In this post, Devi and Anoushka start an important evidence-based discussion about why diversity and inclusion are central to addressing complex challenges. Central to the rationale for taking a market systems approach is that market systems are complex systems, which means that they are dynamic, evolving systems that are influenced by many factors all at the same time. Because there are many factors influencing a market system at one time, traditional approaches that assumed away all the factors except for one technically solvable factor have not worked. As donors have become more comfortable with recognizing that development is complex, they have also had to realize that the process for addressing complex challenges is different to traditional approaches. Specifically, complex challenges need teams that can engage in a learning and creative problem-solving process that emerges of overtime. Organizationally, best practice for such challenges includes teams that are diverse and inclusive of as many perspectives as possible. Diversity and inclusivity are not only a nice thing to have, but are necessary characteristics of teams that are effective at generating results in complex environments.
In this blog series, we examine the ways in which the concepts of diversity and inclusion apply to market systems programming. We hold that diversity in complex adaptive systems is one signal of a healthy market system. To this end, embedding these principles in programming will contribute to successful market systems activities whose results will ultimately be more sustainable in the long run.
The concepts of diversity and inclusion are increasingly becoming integrated into workforce management across the public, private, and non-profit sectors. According to George Washington University (GWU), the term “diversity” is commonly used to describe “individual differences (e.g., life experiences, learning and working styles, personality types) and group/social differences (e.g., race, socio-economic status, class, gender, sexual orientation, country of origin, ability, intellectual traditions and perspectives, as well as cultural, political, religious, and other affiliations) that can be engaged to achieve excellence in teaching, learning, research, scholarship, and administrative and support services.” GWU defines inclusion as “the active, intentional, and ongoing engagement with diversity -- in people, in the curriculum, in the co-curriculum, and in communities (e.g., intellectual, social, cultural, geographical) with which individuals might connect.” Diversity and Inclusion (D&I) are now seen as a crucial aspect of increasing productivity for organizations, no matter what their goal.
Diversity is an important characteristic of a healthy market system. In particular, there are three ‘capacities’ in market systems that are bolstered or enhanced as a system becomes more diverse:
Within international development programming, D&I is integral when working in market systems and navigating complexity. A diverse and inclusive team is more likely to bring about the variation needed to catalyze market system change through individual and social differences in perspectives, viewpoints, and ideas. When aligned around core principles such as poverty alleviation, they are better able to support market actors to explore different pathways for business growth and inclusion as well as generate innovation where needed. A diverse and inclusive team is also more likely to support market actors to navigate risk in constantly changing environments by thinking ‘out-of-the-box’ when observing signals, making adaptations, and finding creative ways to solve problems.
From program design through implementation, learning, and adaptive management, and monitoring and evaluation, diversity in staffing and perspectives can be invaluable to the market system change. For example, by cultivating an inclusive, diverse team and hiring staff with diverse backgrounds, one program in Kenya was able to advance its goals. Specifically, the program hired a marketing expert to support inputs distribution strategies for smallholder farmers. Not only did she fit a diversity profile as a young Kenyan woman, she also was from the private sector and introduced new cross-cutting interventions in ICT and media, which became a new space in MSD and agriculture. She also linked the program to a young, creative, tech startup scene in Nairobi. This is just one of the ways that programming responds positively to applying D&I concepts to MSD.
In Part 2 of the Diversity and Inclusion Blog Post Series, we’ll dig deeper to explore how D&I plays out at some of the key junctures of MSD program design and implementation.
By Lorenz Wild, a seasoned MSD practitioner who is currently on pseudo-sabbatical in Italy and actually has some time to think about stuff rather than dash wildly after donor reports, partnership negotiations, staff capacity building, baselines, budgets, and so on.
In this provocative blog, Lorenz highlights what many systems thinking development practitioners have been struggling with for years, which is whether the myopic focus on saving the individual ignores more dangerous systemic misalignments. A central theme in the 2019 Market Systems Symposium was a call for more donors, practitioners, researchers, etc. to question long-standing assumptions about development, economics, markets, and agriculture. Through the use of systems-thinking lenses, insights can be gained on why serious issues such as climate change, inequitable markets, and political corruption remain so intractable, including how positive change can be catalyzed. It seems increasingly clear that good development has to be able to do both, deal with immediate and acute issues facing certain populations, while also embracing complexity as a way to more effectively catalyze positive and inclusive systemic change.
This blog will raise the question of how we, as MSD practitioners, should respond to the failing global economic model upon which we base our work.
I left the Market Systems Symposium in Cape Town energized and excited. Catching up with old colleagues, meeting new people, and sharing learning all made me feel like I was part of a community of leading thinkers in MSD, ready to take on global challenges for the well-being of others. But I was also left with a nagging thought, a feeling coming from the gut that has bothered me since I started doing economic development work in 2005 in Kyrgyzstan. And while I was planning on writing a simple practicable blog upon my return, I’ve suddenly been called to fry a bigger fish as I once again question whether or not, through our work, we are promoting a global economic model that is sustainable and equitable.
I actually believed to have found the answer to this question some years ago when the value chain development approach evolved into Making Markets Work for the Poor (M4P), now more commonly known simply as Market Systems Development (MSD). In this approach practitioners identify opportunities to benefit the “poor” (by economic standards mostly) by capitalizing on existing market forces.
I dove into the MSD world, excited to put my brain and brawn behind an approach that aims at benefitting the “poor” in a sustainable way that is also scalable, the multiple MSD orgasm. I worked in Ethiopia, Jordan, and Solomon Islands on MSD projects that saw thousands of people increase their resilience, incomes, and find jobs. But, despite these and other positive development outcomes, the nagging feeling in my gut grew stronger, and the question - am I promoting an economic model that is inherently unsustainable and inequitable? - grew louder.
I am now seeing that the answer has been screaming in my face for years, starting with the 2008 global financial crisis, the Panama and Paradise papers, global warming, the plastic waste dilemma, species extinction, continuing violence around the world; the list goes on and on.
While our global economic system, largely of neoliberal capitalist timbre, has helped, and continues to help millions to rise up out of economic poverty, we have bet on the future and negated the costs of negative externalities that are now coming to the fore. This is especially evident in our current environmental crisis, the resulting climate change-promoted natural disasters costing millions in dollars and lives, and record-breaking levels of “economically developed” illnesses such as cancer and depression.
While disheartening statistics, such as the one from the 2019 Oxfam Report showing that the "26 richest people on earth in 2018 had the same net worth as the poorest half of the world’s population, some 3.8 billion people” could be justified by the fact that a rising tide lifts all boats, more troubling is that the report also claims that 2,200 billionaires worldwide saw their wealth grow by 12 percent, even as the poorest half saw its wealth fall by 11 percent.
Yes, statistics can be cooked, framed, and re-framed, and used for an agenda, and not all development is regressive. The book Factfullness, by Anna Rosling Rönnlund, Hans Rosling, and Ola Rosling, actually shows that, in terms of the United Nations Millennium Development Goals, some real progress has been achieved, especially in the areas of health and education. But I again ask, at what cost?
One doesn’t need to be a genius to understand the basic mechanism that an increasing global population with increased wealth, largely coming from the regions of our work, require more food, demand more meat, and with improved purchasing power will want to take part in the race to own all the latest gadgets. Agriculture is shown to be one of the biggest, if not biggest, contributor to climate change. So how is this going to work?
This paradox is what has scientists screaming; activists screaming; youth screaming; spiritual leaders screaming (see the encyclical "Laudato Si" - “On Care for our Common Home” - from Pope Francis addressing environmental challenges, economic systems, and the question of social justice); while we, MSD practitioners, enthusiastically labor to perfect the MSD approach, fail to look up from the microscope to see the larger reality that with good intentions and some good results we are promoting an economic system that is failing humanity, failing to contribute to the common good of all.
The “common good”, rather than just wealth, is, in fact, what the economy is supposed to produce. As Claus Dierksmeier, director of the Weltethos-Institut (Global Ethics Project Institute), points out, this idea has been a historical consensus of the greatest political and philosophical minds (Reframing Economic Ethics. The Philosophical Foundations of Humanistic Management, Palgrave Macmillan, 2016, p. 35). It is also the principle and fuel of various new movements underway, including the Institute for New Economic Thinking, the New Economy Coalition, the New Economic Foundation, and one by my fellow Austrians, Christian Felber, the “Economy for the Common Good Movement”. Felber echoes Dierksmeier as he shows us that virtually all constitutions over the world posit that the economy must be a means to an end, and not the other way around (see Colombian constitution’s article 333, US Constitution’s Preamble, and Bavarian constitution’s article 157).
So what does this principle, of the “economic for the common good" mean for us, MSD practitioners?
What is our stance? What is our role, if any?
Are we satisfied knowing that our work improves the lives of many now, while contributing to future negative impacts for the entire planet?
By Peter Saling, Associate Director, Winrock International
In this blog Peter Saling discusses concerns in how international develop often takes an, “I know better” approach when designing and implementing projects. While the blog focuses on youth, Peter raises a broader concern about how development practitioners and donors often pre-define a solution or outcome that they have decided is appropriate. Although well intended, from a systems thinking perspective, it is not good practice for a project to predefine and deliver a single solution. Rather, systems thinking approaches should catalyze and amplify connections and emerging behaviors that harness a system’s own human (and other) capital to innovate solutions that work in that system’s context. In systems thinking, a country becoming self-reliant is sexy.
,In the United States, May and June is graduation season, when America’s youth mark an important milestone in leaving behind known comforts and pursuing economic independence. The occasion is observed with platitudes from community leaders, politicians, business leaders, and celebrities about seizing the moment, the endless opportunities ahead of them, and being the change they want to see in the world. The messages are at once familiar and totally forgettable.
To my knowledge, not one of these speeches encouraged young Americans to be smallholder farmers. President Barack Obama spoke at my graduation in 2010. Can you imagine if someone had told his father his future was limited to smallholder farming?
Yet, this is the future envisioned by donors, development leaders, and programs throughout transitioning economies. Why should the young people of Kenya, Senegal, or Vietnam have their opportunities defined by programs meant to give them those same opportunities for economic independence? How can we, as development partners and implementers, encourage the boundless ambition and creativity of today’s youth?
At the Market Systems Symposium 2019, practitioners and thought leaders from throughout the development community met over three days to discuss the challenges young people face in agriculture, experience in designing and scaling interventions that create opportunity for youth, and how to engage young people as the leaders of transformational change, not those to whom change happens.
In keeping with the tired tradition of the graduation speaker, we arrived at a list. But not a list for young people; rather, a list for the adults in our industry intending to empower them. So to the donors, the developers, the designers, and the doers, these are our development rules for engaging youth in agriculture:
A recent New York Times article boldly proclaimed, “Millennials ‘Make Farming Sexy’ in Africa, Where Tilling Soil Once Meant Shame.” The article went on to explain how young people in Ghana, driven by technology, social commitment and, yes, profit, are causing a cultural shift around attitudes toward agriculture in Ghana. As development practitioners, let’s expand the opportunities for young people in agriculture, not define them. Let’s bring sexy back.
If that had been President Obama’s message, perhaps I would remember more of what he said.
By Sadruzzaman 'Tamam' Noor, CARE Bangladesh
In the following blog, Sadruzzaman Noor provides and interesting perspective of a practitioner at the forefront of learning and applying systems thinking. In the blog, a number of important challenges are raised. For example, many practitioners absorb new ideas like market systems thinking through experience. At the same time, learning something from experience can lead practitioners to perceive that there is a specific market systems approach. During the Symposium, many systems thinkers raised an important concern that ideally, international development practitioners should not focus on a market-systems-develop approach, but rather focus more on learning how to apply systems and complexity lenses to challenging market conditions and contexts. While there can be some tension between these points of view, it is increasingly clear that being able to both support field practitioners learn from experience and establish greater clarity around the theoretical underpinnings of the thinking is important.
The approaches being undertaken nowadays by the international donor bodies to improve lives of the general population in underdeveloped parts of the world differ significantly from approaches assumed a couple of decades ago. We have seen the emergence of systemic thinking and market systems development (MSD) approach that are quite distinct from the conventional aid schemes. We have predicted, observed and analyzed the merits of involving the market in pushing the agenda of enhancing living standards in the package of increasing inclusivity as a tool of sustainable business growth. This is mostly because we have learned to identify the root causes of market level failures that bars the flow of production and delivery of goods and services for all. As a result, and as a general solution, the market systems development professionals are putting up a great effort to increase the frequency and quality of interactions between providers and consumers through short term projects engaging the private sector anticipating behavioral changes at both tiers.
The market systems development programs (MSD) follow a number of facilitation guides that would help the managers to plan and communicate strategies to engage the private sector in achieving certain goals. However, as the vast majority of the aid workers working in this sector in developing countries are still graduating to this relatively new market systems approach and as the saying goes “unlearning is much more difficult than learning”, MSD project managers often face troubles in acquainting the team and other relevant stakeholders into the complex paradigm of systemic thinking. This article offers a summarized private sector engagement and facilitation approach to help project managers in this regard and trigger critical thinking within the team.
A good starting point is explaining how MSD works and why we need the private sector engagement to find solutions to most of the questions present at the market level. Let us start by trying to define these two in the following chapters.
2. Market Systems Development
Markets, just like any other system, are composed of several components such as actors (e.g. private companies, service providers, consumers), their relationships (e.g. transactional, partnerships), and the dynamics of the relationships (e.g. bargain power, influences). Apart from these, there are norms and perceived notions that dictate how these components function. Simply put, a ‘market’ is a thing that allows a range of actors to exchange values, in other words ‘problems and solutions’, which help these actors to survive and grow. The main role of markets is to provide the space to create opportunities for participation of buyers and sellers. The performance of a market is calculated from the quality and quantity of opportunities it creates and the proportion of the relevant population it invites to participate.
Markets move in the direction the actors chooses it to. Interestingly, when we observe markets, we identify two key issues:
a) Buyers and sellers do not efficiently foresee the outcomes of following certain directions in dysfunctional markets. This lack of foresight basically makes these markets low-performing.
b) Markets always rectify itself. Whenever there is a gap of certain product (a good or a service) in a well functional market someone usually steps up and fills it.
Now, these two issues may seem counterbalancing each other, and mostly it does. A low-performing market do have the need of policies, tactics and guidelines that may help it get better. This latent demand, once surfaced, can call out to entrepreneurs and authorities to adopt strategies and standards that can add value to the performance of the market. The only real issue to be addressed here is the speed of change. There are many actors who are extractive and do not see investing in growth to be profitable because no one else is doing it. This is where the MSD approach can offer it service to ‘accelerate’ the process.
Here is the thing, MSD professionals do not offer real solutions to real problems. Rather, they bring the actors together who might be interested in solving the problems. Hence, MSD approach tries to establish mechanisms that guide the market to become more resilient to internal and external threats by equipping them with systemic thinking patterns.
This is much easier said than done. One might wonder why extractive actors would listen to these external characters such as MSD professionals. This is exactly where the facilitation part comes.
3. Facilitating MSD Programs
An integral part of changing the direction of a market to make it more participatory and inclusive is to involve the private sector stakeholders who would be potentially benefited from such a change. Graduating businesses from having an extractive attitude to supporting growth and investing more on process innovations and product designing can lead towards increased traction. Moreover, we have seen many projects providing ready-made solutions to specific market level actors that brought immediate success, but died down as soon as the flow of donor money stopped. So, it is very important to ensure that the ownership of change lies with the agents of change, i.e. the market actors.
Putting things into perspective, even in high performing markets there is a very high (nearly 90%) rate of failure for start-ups. However, if the market system is designed in a way it provides cushion for entrepreneurs to get back on their feet and try again, the total number of trials will keep increasing. Markets learn from their failures, adjust tactics, and retry enriching the institutional memory of the sector in the process. This is exactly how the world got popular products like NetFlix, Facebook, Uber and AirBnB, simple trial and error. This is a continuous process that helps markets to get better in terms of becoming more participatory and creating more opportunities.
Naturally, businesses strategize on evidences and peer learning. Innovations can be expensive, and with the lack of the ‘cushion’ we discussed in the previous paragraph, it can bear high risk in low-performing. Merging these two concerns an MSD program assumes two important roles such as –
The Evidence Collector MSD programs should analyze the market by gathering and dissecting data. There has to be some potential for growth showing benefit for the actors to make any change. The duty of generating tailor made business cases incorporating inclusive growth lies with the MSD programs.
The Guarantor MSD programs should help market actors to see the benefits of trying out new things, learning from failures and adjusting tactics. We often see private sector actors, especially in stagnant economies, showing reluctance to invest in innovations. This is where an MSD program can add real value in sharing the risks and shaping the behavioral patterns of private sector actors to move towards inclusiveness.
By assuming these two roles, there are several ways an MSD program can shape its own guideline of market facilitation. I would like to share one variant of such a method in the following chapter I have been following to guide my teammates, most of whom have very recently been oriented in the MSD approach.
4. Private Sector Engagement Strategy
Shomoshti is an MSD program funded by SDC and implemented by CARE Bangladesh. It works across 6 agricultural subsectors in 4 geographic hard-to-reach regions with poor and disadvantaged population who are vulnerable against natural disasters. One of the key focuses of the project is to bring change in the market through efficient mobilization of the private sector enterprises.
There are certain roles Shomoshti has undertaken to improve the performance of the Bangladesh market working within the scope mentioned. The facilitation model adopted by the program has 3 parts that would benefit the private sector partners:
A. Incentive Identification
As discussed in last chapter, an MSD program needs to identify incentives, economic and social, for the private companies and so that a business case can be built on the opportunity. The potential growth of business from increased interactions should be projected as convincingly as possible to attract private investment in sustainably increasing inclusiveness. And to make it convincing, offering strong data augmented by logical analyses is imperative. Therefore, this is the most important mission for the project to gather and present market data that shows incentives.
B. Institutional Memory Creation
An MSD program works towards changing the behavior of market actors. To do this, the program needs to collect and manage evidence of impact per dollar. In doing so, the program tries to build the institutional memory of the actors and the market as a whole establishing the merit of the intervention idea. For example, packaging seeds at a lower cost targeting ultra-poor farmers has not been interesting for large agri-input companies in Bangladesh before a program shared the costs in launching such a project to try out the idea. It became an instant hit in bringing profit for the company as well as increasing poor farmers’ chance to generate more value from their crops. Nowadays, there are several initiatives taken by private agri-input companies in Bangladesh that target low-cost packing of inputs to penetrate the ultra-poor market segment. The market learned how to utilize its forces to adjust and respond to its own call. The MSD program would help the market in creating this institutional memory.
C. Ensuring ROI
Three most important factors related to scale and sustainability should be remembered while designing an MSD program. These are – Relationships, Ownership, and Intensity of investment. As the program assumes the role of a guarantor that is trying to help the private sector to learn the merit of “trying out new things”, these three guiding principles can help build effective interventions. We will briefly discuss this in the following paragraphs.
Since, an MSD program tries to find solution from within the market system, it is of utmost importance that the interventions work towards improving the relationships between the market actors with as light a touch as possible. For example, we often see traditional donor projects to intervene between the connection of vegetables farmers and collectors by imposing fixed and higher than market rates. This would only provide the farmers a relief for a short time by gaining higher price of their vegetables. However, this distortion would not sustain as the market forces defined by higher bargain power of the traders will push it back to the previous status as soon as the donor money dries. On the other hand, the program would have a better chance in gaining impact – higher prices for farmers – by strengthening the connection between the parties, facilitate exchanges of information, and finally letting the market work out the balance in the price.
The ownership of the intervention should stay with the change agent. Often MSD programs fail because they do not do a good job in transferring the ownership of change to the market actors. A really good analogy is that of the magic solution pill. Often programs try to find out the magic solution pill to a certain systemic constraint, package it with academic wisdom, and force a partner to implement it hoping for a positive success story to emerge out of it. However, since the private sector partner had not really own the idea, it seldom continues the effort even if profit is seen. A good way to ensure its true involvement is including it at the planning stage of the intervention and create avenues for it to invest. Reinforcing the actor’s relationship with relevant stakeholders as described in the previous paragraph also helps because it enables the private partner in assuming the role of a change agent.
Finally, an MSD program should avoid pouring down money to help push a certain solution. Often, this does not work in the long run. For example, there are programs that tried to help the dairy subsector of Bangladesh by partnering with private milk processing firms to establish milk-fat testing machine at village level collection points. Though initially it was successful in generating a boost in price for dairy farmers in the short term and helped them understand the benefits of target based production, e.g. feeding the cows with a target of increasing fat content in the milk. Point to be noted is that these testing machines are very expensive and though it would help the processors in the long run to ensure sourcing better quality milk it calls for a very high financial commitment. As a result, this solution proved to be too costly to be uptaken by private sector and ultimately was not scaled up. Learning from examples like this, an MSD program should always look for the sweet spots where the private partners’ required internal rates of return on investment match makes sense for the investment being committed by an MSD program.
There are many cases where we see programs to fail to achieve sustainable impact in spite of having an apparently fail-proof strategy. All of the initiatives mentioned in the previous chapter are from well-known programs vetted by experienced strategists, experts and donors. However, as the saying goes - “the devil is in the detail”, a program needs to be sound in deploying tactics. Introducing tactical thinking to the inexperienced team can lead to changes and bring real impact.
 This situation has its roots to another related issue called ‘profitability’. For example, even if profit is seen by catering to the ultra-poor market segment, a large national level agricultural input company in Bangladesh with limited supply of credit might calculate the ‘profit-per-dollar’, compare it with other options (such as investing further in the high value market), and get discouraged to continue.
 Fat content is very important for milk processors as generally water is stripped down for most of the processed milk based consumer products.
This post was reblogged from LinkedIn. View the original posting here
The MSDHub Blog Series is authored by respected implementers and donors of market systems projects globally.