Hybrid Market Systems Development to Reinforce System Resilience and Climate Preparedness
Updated: Sep 2, 2022
Results and Lessons Learned from Promoting Sustainable Potato Cultivation in Uganda
In Uganda, smallholder potato farmers benefitted from the REACH project’s hybrid market systems development approach to increase their production of higher-quality potatoes. Photo Credit: IFDC
Editor's note (Michael Field from the Vikāra Institute):
The blog raises an important point about the evolution of market systems approaches. While orthodox MSD, as the blog puts it, would focus on facilitation versus direct implementation as an essential element of market systems projects, good MSD practice is increasingly recognizing that once a project interacts with market actors, it is directly intervening. This is because, at this point, via market actor interaction, anything a project does from this point forward would need to be taken on by system actors in the future. Said another way, the pathway for a country graduating from needing donor assistance includes almost all functions a project performs, even when ‘facilitating .’This updated thinking suggests that direct versus facilitative might not be a useful distinction. Instead, the distinction could lie in whether an intervention is catalytic in a certain context, which the blog points out was the case in Uganda. Vikāra Institute uses the idea of context-dependent intensity or the importance of figuring out an appropriate mix of financial, human, and influence capital to use to catalyze positive change. MSS2022 will take on this evolving and important issue from multiple angles, including markets in crisis, climate change, and social inclusion, as certain contexts might need a more intensive effort from MSD programs to catalyze positive systemic change.
Successful climate adaptation requires access to specific inputs and services and knowledge of good practices to deal with more extreme weather patterns. This puts pressure on farmers, the market system of suppliers around them, and, indirectly, market system facilitators. Getting it half right may no longer be good enough – any room to maneuver is disappearing.
Market systems development (MSD), as a development methodology, emerged early in the new millennium. It has undergone several iterations, from enterprise development to Making Markets Work for the Poor (M4P). Hybrid MSD gradually and carefully adapts the MSD approach to diverse contexts and circumstances. Whereas direct delivery approaches have become more “market-based,” MSD has moved in the opposite direction, to remain systemic, yet more adaptative and responsive to context.
This case study describes how, confronted with such a scenario in potato cultivation in Uganda, the Resilient Efficient Agribusiness Chains (REACH) project – funded by the Embassy of the Kingdom of the Netherlands (EKN) and implemented by the International Fertilizer Development Center (IFDC) – opted to “go hybrid.” REACH’s hybrid approach took shape over time as it reflected on its MSD work and farmer-training programs. The project realized that some bottlenecks could not be addressed using an orthodox market systems approach only.
Potato in Uganda: An Emerging Cash Crop in Need of a Resilient Market System
Potato is highly relevant for food and nutrition security, yet farmers in Uganda are only achieving half of the yield potential. Potato is also a demanding crop. Clean seed, application of appropriate agrochemicals, and crop rotation all contribute to achieving good yields and keeping soils free of contamination from soil-borne pests and pathogens. Barriers to successful potato production in Uganda include:
The seed potato industry in Uganda is virtually nonexistent.
Appropriate application of inputs is expensive and access to capital to prefinance a season is severely limited.
Smallholder farmers lack sufficient access to land to practice crop rotation.
Although the climatic conditions in Uganda are suitable for potato cultivation and demand for potato is strong locally, in cities, and in export markets, productive cultivation cannot be sustained until an appropriate market system is in place.
Almost 60% of farmers in Southwestern and Eastern Uganda report that potato yields do not meet production expectations due to harsh weather conditions. Potato-growing areas are increasingly subject to uncertain rainfall and changing rainy seasons. Farmers report extreme weather events, including flooding and minor incidences of drought.
If farmers are to resist, absorb, and respond to climatic events, they require integrated and flexible solutions. To assist them, REACH decided to go hybrid and offer more development-oriented interventions when private sector actors could not immediately fill identified gaps.
As with orthodox MSD, a hybrid approach still begins with an analysis of the market system, which forms the basis for a clear, evidence-based vision for system change. However, this may need to be modified and adapted, especially in thin markets with a nascent private sector.
REACH identified four key systemic bottlenecks that were restricting potato sector development in Uganda:
Absence of a local industry for clean, affordable seed. In 2016, only 5% of national demand for seed was met.
A very limited last-mile delivery system in fertilizer and crop protection products. Only 60% of potato farmers were using any kind of fertilizer in 2016; of those, practically none of them applied the proper type or dose of fertilizer.
Financial services to facilitate investment in good agronomic practices (GAPs) Only 16% of farmers in potato-growing areas were accessing loans.
Limited knowledge of GAPs and new developments/techniques for climate-smart agriculture (CSA) to climate-proof potato production.
Other identified issues, including infrastructure and policy, also were addressed in the project’s strategy.
The hybrid approach was twofold.
On the systems side, REACH formed partnerships with 10 emerging businesses in three key areas: establishment of a local seed industry; facilitation of last-mile distribution of, and services for, agrochemicals; and deepening financial inclusion.
On the farmer knowledge side, in light of Uganda’s nascent potato market system (virtually no seed multipliers, limited last-mile distribution, etc.) and the absence of market actors able to lay the groundwork for GAPs and climate-smart innovations, REACH elected to work through non-governmental organizations (NGOs) and public sector extension workers to provide farmer uplift training.
An emerging seed potato industry. Local seed producers have reached over 3,500 farmers with clean seed. At full production capacity, they will supply over 5,000 farmers per annum, which is equal to 26% of the national demand.
Enhanced last-mile delivery of fertilizer and crop protection products. An additional 30 agro-dealers were trained and began promoting potato-specific fertilizer products. Agro-dealers sold over 340 metric tons (mt) of specialized fertilizer, although market penetration is still low compared to generic fertilizers.
Financial inclusion for smallholder farmers. A total of 589 village savings and loan associations (VSLAs) were established, trained, and proceeded to open up savings accounts with financial institutions. In 2021, 31% of farmers had access to loans from financial institutions, compared to 16% in 2016.
Adoption of good agricultural and climate-smart practices. Of the 13,000 potato farmers trained on GAPs and CSA, over 75% were practicing six out of 11 CSA potato practices, compared to 48% at baseline. Significant gains were made in the use of higher yielding, clean seed; appropriate fertilizer application; and reduction of pest and disease incidence. CSA approaches, such as crop diversification (for food security and soil health) and soil and water conservation methods, also improved.
Through the hybrid MSD approach, knowledge practices and access to products and services within the nascent system have resulted in improved yields of potato from 3.07 mt/acre to 4.15 mt/acre, net income increased for potato farmers from €383 to €689, and food security improved from 55% to 62% due to improvements in yield, income, and crop diversification.
Lessons Learned on a Hybrid Approach
For systemic development and farmer uplift to work in tandem, both sets of activities must be integrated into one market system strategy.
Even when market actors are still establishing themselves, the project should include them in activities to prepare for their future system role.
Climate adaptation interventions may not always be sufficient; preparedness and risk reduction need to be considered in the full menu of CSA options. Getting the right products and information to farmers in a timely manner will require a more robust market system.
This blog references an upcoming paper by David Hirst; Harald Bekkers, Founder and CEO, Opportunities Unlimited B.V.; and Muneeb Zulfiqar, Private Sector Engagement Specialist, Opportunities Unlimited. B.V. It will be featured on the IFDC website and forthcoming publications by Opportunities Unlimited B.V.