This book is a synthesis of market approaches to development that have worked and provides the lessons learned from seven case studies from around the world. It discusses the challenging roles of development agencies as facilitators who should act in support of the private sector rather than in place of it.
Key Findings:
- As soon as it pays for retailers, wholesalers and manufacturers to produce, to stock and to sell those goods and services, thriving markets can emerge and can do wonders. The most critical issues are a) awareness creation and b) solving the affordability issues. Innovative financing mechanisms such as instalment buying, rental or leasing could be the key to making markets work better.
- Marketing channels require that small farmers get organised and are linked to value chains driven by private sector companies. Small farmers are less at risks from exploitation than from marginalisation, so it is more important to have a contractual relationship with organised value chains. Value chains are more interested in quality performance and reliable delivery schedules than on the lowest prices; more and more products need to be traceable and certified whether they are produced under sustainable social, economic and environmental conditions. It is a challenge but also an opportunity for small farmers to participate in such value chains.
Recommendations:
- A series of measures and interventions are needed to upgrade traditional industrial sectors such as the brick or the carpet industries: new technologies, designs, marketing initiatives are needed to make those industries more competitive and to provide decent working conditions in an environment that is mostly interested in lowering the costs. More efficient technologies can benefit the environment as well as improve quantity and quality of production. However, switching to those more sustainable technologies requires higher initial investments and as long as polluting technologies are allowed, there is little incentive for changing over. Strong environmental and social regulations are as important as suitable financing mechanisms.
- Donors should act as facilitators and stimulate private initiative by creating markets, linking small farmers to value chains and transforming industries. Stimulating the private sector means understanding what is required for the private sector to perform and to reduce their transaction costs by improving the organisation and infrastructure of markets. Transaction costs can be reduced by investing in market studies, generic promotion, social marketing and skills development and by creating better framework conditions.
- Donors should not act in the place of the private sector. They should not subsidise transactions, but instead introduce measures to reduce transaction costs and risks. Instead of cutting out middlemen, they should understand what meaningful role they can play, support them and act as dialogue platform.
