The Springfield Centre The Making Markets Work for

The Springfield Centre The Making Markets Work for the Poor Approach (M 4 P) What it is and where it’s going The M 4 P Approach Rationale, issues and opportunities A 1 -day seminar sponsored by DFID and SDC Bangkok, November 2008 Springfield Centre | Making markets work

Objectives Highlight key features of the market development approach* Summarise some key challenges and opportunities for the way ahead * Also known as Making Markets work for the Poor or M 4 P Springfield Centre | Making markets work

Structure § Rationale and origins (the why) § What it is § How M 4 P works in practice § Taking M 4 P forward But before that, an example. . . . Springfield Centre | Making markets work

Case study: Uganda rural SMEs constrained by lack of information Project A: 1999 --; US$2. 5 m/3 yrs; est. av. $0. 5 m/yr 2 projects Increase info for rural MSEs “Info is a long term strategic public good” Peak of 7 -8 m listeners Goal Initially 10 stations but dissemination cut as funding cut to $50 k/yr. Other activities remain donor funded: Outreach Sustainability Project B: 1999 -2007; ~US$1. 2 m Establish sustainable, effective info for rural MSEs via the mass media 7 m regular listeners 24+ stations with MSE independent programmes; emerging new programmes & support services: no donor funding Springfield Centre | Making markets work

What explains the difference? Provide information to MSEs Symptoms: what info do the poor need? Unclear: “A long term strategic public good”, but no assessment of govt capacity or incentives Direct involvement & finance: • info collection • analysis • prog production • purchase airtime • coordinate Rationale Understanding Sustainability Action Make commercial media work better for MSEs in rural areas Causes: understand structures, practices, incentives of media system – why not pro-poor? Explicit: commercial, based on local ownership & incentives, appropriate for local context Facilitate and catalyse: • develop own understanding, networks & credibility • influence, demonstrate & link • TA to stations & other players • work through local actors • no finance to radio stations Springfield Centre | Making markets work

Overview of Project B: FIT-SEMA, Uganda FIT-SEMA was implemented by ILO and funded by several donors, including Sida, DFID and the Netherlands Main activities Achievements Built capacity and incentives of radio stations and other players to improve programming 25 stations – 50 new programmes Limited support for programme innovation Demonstrate “business case” Strengthen market supporting functions 7 million + listeners Impact Improved information, voice and business environment Springfield Centre | Making markets work • Exposing corruption in contract farming • Improving conditions for market traders. • Empowering women microbusinesses.

The essence of the market development approach Rationale and objective The explicit objective of more effective and more inclusive market systems and of the facilitating role of development agencies Framework for analysis A lens through which we view the world to help us identify and diagnose constraints and opportunities for market system development Guidance for action A set of principles and practices that guide intervention design and implementation consistent with objectives and understanding Springfield Centre | Making markets work

Structure § Rationale and origins (the why) § What it is § How M 4 P works in practice § Taking M 4 P forward Springfield Centre | Making markets work

Rationale and origins The development world The real world The market development approach (M 4 P) M 4 P In practice Conceptual thinking Springfield Centre | Making markets work

The origins of market development In different spheres of development, similar experiences… Health Agriculture “The key requirement is to engage “in ways that are non-distorting, marketoriented and capable of generating net benefits for the poor” Joffe et al “Key systemic reasons for suboptimal functioning of health systems are. . disjointed engagement of the private sector in delivering health care” Spinaci et al Business services Business environment reform “The objectives of outreach and sustainability can only be achieved in well-developed markets for business services” Donor Committee “Because the problem of poor business environments is systemic, genuine solutions must also be systemic” Jacobs Livelihoods Financial services “A more imaginative approach is needed, rooted in stronger understanding… of institutional development in economic growth, with market development one part of that institutional development” Dorward et al “To achieve its full potential, microfinance must become a fully integrated part of a developing country’s mainstream financial system” CGAP …a shift towards market systems Springfield Centre | Making markets work

Across all development fields… two common problems Remote Reformers • Priority – overall, distant macro-picture • Get prices right and the supply-side will follow • Standard policy prescription M 4 P has emerged from this context Impulsive Interveners United by failure to ground what they do in: • Direct provision of subsidised finance, advice, materials etc. (1) market realities • If the markets not working, do it yourself. (2) the way systems work • Replace the market (at least in the short-term) (3) a clear vision of how they can work better Failure to recognise institutional realities Bring about final ends (but neglect market means) Ignore appropriate roles of key players Springfield Centre | Making markets work

Structure § Rationale and origins (the why) § What it is § How M 4 P works in practice § Taking M 4 P forward Springfield Centre | Making markets work

What it is – key features Aimed at Systemic change Based on an understanding of Market systems A strong emphasis on Sustainability Implementation through Facilitation Different contexts, different tools as an Overarching approach • The systems around our ‘target groups’ • Large-scale • Causes not symptoms ‘Close’ knowledge of: • functions and players • constraints and opportunities • View of the future shapes interventions now • Who does’/‘who pays’ framework • Crowding-in other market players and activity • Key principles and frameworks Applicable to wide range of situations and using many tools Springfield Centre | Making markets work

… From firms… to systems Market development Conventional Funder Provider (Govt. or NGO) Market of SME consumers and suppliers Facilitator SMEs Social benefits Poverty reduction Springfield Centre | Making markets work

A focus on systems requires different questions Conventional Market development What problems do people/businesses have? What problems do people /businesses have? Why isn’t their market environment providing solutions to these? How can I help to solve these? … Why isn’t the market system working for the poor? Springfield Centre | Making markets work

The market system SUPPORTING FUNCTIONS MARKET PLAYERS tru ras Inf . . lies here CORE Supply s ion Setting & enforcing rules Standards Laws es & lat gu Re Informal networks Demand Private sector The cause of poor performance here. . . Inf no orm rm al rul s Government Informing & communicating ed at s el ce R rvi se ctu re Information RULES Not-for-profit sector Springfield Centre | Making markets work Business membership organisations

Applied to interconnected market systems shoes agroprocessing garments etc bicycles business services telecommunications financial services etc Public or collective services: eg standards, advocacy, etc Enabling environment set by policy & regulation etc Springfield Centre | Making markets work

Interconnected market systems SUPPORTING FUNCTIONS CORE ? shoes agroprocessing bicycles garments RULES etc business services telecommunications financial services SUPPORTING FUNCTIONS etc CORE ? RULES Springfield Centre | Making markets work

Operationalising sustainability Now Future Ambitious Realistic Valid

Facilitating system change Catalysing Not “what you do” but “how you do it” ‘Right’ touch Flexibility • Initiating, motivating, linking • Crowding-in, not crowding-out • Active – not passive • Appropriate levels of support to market players • Often indirect • Responsive and opportunistic. . . • . . But guided by strategy Springfield Centre | Making markets work

An overarching approach - applicable to specific market systems Health Land Services Property Commodities Value chains The market development approach Finance Education Products Labour Voice and accountability Generic Approach … applied to specific markets Springfield Centre | Making markets work

An overarching approach - using different tools The poor and their context Socio-economic studies, census data, poverty assessments, livelihoods analysis, investment climate surveys, competitiveness analysis, drivers of change Specific market system Systemic constraints Access frontier, value chain analysis, consumer research, productivity studies, regulatory reviews, organisational appraisal tools, stakeholder analysis, participatory tools Intervention focus Focused interaction with informants, interviews, focus group discussions, brainstorming Causes Springfield Centre | Making markets work Symptoms

Structure § Rationale and origins (the why) § What it is § How M 4 P works in practice § Taking M 4 P forward Springfield Centre | Making markets work

How it works? Dependent on facilitator. . . Not a formula Common frameworks Not precise models - it’s about markets! Central questions Key principles Not an excuse for not thinking! Closeness Knowledge and insight Entrepreneurial instincts Independence Springfield Centre | Making markets work

How? – key stages in implementation 1. Setting the strategic framework 5. Assessing market system change Monitoring and evaluation Vision and rationale Identification and research 2. Understanding market systems Implementation Planning and design 4. Facilitating market change Typical project cycle Springfield Centre | Making markets work 3. Defining sustainable outcomes

Main steps along the pathway to crowdingin Market not working Market working better Step 1: Initial interventions Step 2: Overall market vision Step 3: Multi-faceted actions to promote system change Period of intervention Springfield Centre | Making markets work

Potential interventions A range of activities are possible. . . Social marketing to stimulate demand Technical assistance to supply-side players Introducing new idea or ‘business model’ Information on new opportunities Technical assistance to regulators Forums for ideas and exchange One-to-one replication Research on constraints and opportunities Limited ‘riskdefraying’ financial support for new idea Developing a new commercial service Vision-building with public and private players . . . as long as these are consistent with: 1. A strategic commitment to crowding-in 2. Key operational principles relating to: • Ownership • Relationships • Resource levels Springfield Centre | Making markets work

Structure § Rationale and origins (the why) § What it is § How M 4 P works in practice § Taking M 4 P forward Springfield Centre | Making markets work

Caution and caveats – some key questions Where does market development meet social protection? Is replacing informal with commercial services good for the poor? What should the role of government be in different contexts? Do the poor always ‘win’ from market change? How can environmental concerns be embedded into market systems? . . . we know something but we’re still learning Springfield Centre | Making markets work

Strategic and operational challenges. . . . How does M 4 P fit within funding structures and mechanisms? Where should facilitators be positioned? What evidence is needed to make a better case for M 4 P? What are the structural options for facilitators? How can ‘good practice facilitation’ be better transferred? How can M 4 P be made more ‘saleable’ to decision-makers? How long should facilitators ‘stay’ in weak markets? Springfield Centre | Making markets work

. . . and opportunities - the prize of systemic change Sustainable change The potential to stimulate. . . - building systems capacity for innovation and renewal Consistency and clarity across development - the same objectives, frameworks and principles in different development spheres Large-scale outreach and impact - building the capacities and incentives for growth Systemic change Springfield Centre | Making markets work Fundamental change - focusing on causes not symptoms

M 4 P in practice: delivering significant, sustainable change • • Financial services in South Africa Vegetable value chain in Bangladesh Coordination Higher access: 39% (8. 8 m) in 2002 – 60% (19 m) in 2007 Higher outputs and productivity amongst 1 m vegetable farmers Systemic changes New commercial information source Improved regulatory processes Better coordination Improved innovation processes • Better farming practices, resulting from. . . • . . . Improved information flows through input retailers • Training supplied by input suppliers • Changing the input supply business model Dairy sector in Armenia Water users in Somalialand Small wool farmers in S Africa Better quality and reliability for 3, 000 users Improved access to services and higher incomes for 5, 000 farmers Springfield Centre | Making markets work Doubling output, securing market access, tripling incomes for 2000 farmers

An agenda for taking M 4 P forward? What needs to be done now to ensure that the potential gains from M 4 P are realised? A key focus for this workshop (which we return to the afternoon) A new resource in going forward three new public documents Collaboration Learning Communication -The Synthesis Promotion -The Perspectives Exchange -The Operational Guide Skills development Evidence Springfield Centre | Making markets work