Issues
Functioning market systems, in which buyers and sellers exchange goods and services, are a central organising principle of successful economies. They can stimulate competition, place pressure on producers to improve products, and in turn offer better value for consumers. Markets are particularly important for poor people, who typically experience weaker informal networks and inadequate state service delivery (SDC and DFID 2008). Poor men and women rely on markets to provide the goods and services that not only fulfil basic needs, but which can be pivotal to strengthening capacity (Springfield Centre 2008; UNDP 2010; SDC and DFID 2008).
When markets are working exclusively or inefficiently, they may not work well for the poor as both consumers and producers (SDC and DFID 2008). Markets can be costly or difficult for poor people to access, and lack effective regulation (SDC and DFID 2008). Barriers to inclusive market development exist at micro, meso and macro levels, and include limited access to finance, weak value chain linkages, capacity constraints and information deficits, and a lack of infrastructure (UNDP 2010). Sustainability is also a key issue demands that a consideration of how market functions can work more effectively in future, including through the use of incentives (Springfield Centre 2008).
Reaching the poor as consumers is an important issue in market development. Poor people are often approached as a homogenous group; however, there are significant differences in terms of wants, needs, and levels of poverty (Heierli 2008). Such segmentation demands a more considered application of marketing approaches to ensure that poor people are reached (Heierli 2008).
Interventions
Donor assistance to market development
As integrating human rights into PSD programming is relatively new for many donors, examples of approaches are limited and incremental. Evidence suggests that more research is needed to bring together the experiences of donor agencies, financial institutions, and NGOs in integrating human rights concerns (Gibb, Foster and Weston 2008). The role of the state and of transnational corporations in rights-based PSD also needs to be more clearly defined (Gibb et al. 2008).
Market development approaches seek facilitate change in business behaviour to deliver positive impacts to poor people and to strengthen the markets that poor people depend on for their livelihoods. Most market development interventions share the view that market-based economic engagement with the poor is essential for sustainable development (Springfield Centre 2008, 2008b). Examples of donor agency programmes include technical assistance and specialist advice to businesses, the introduction of new business ideas or technologies, and the provision of market information. Many interventions occur in sectors where the poor are concentrated, such as agriculture and labour-intensive industries.
Making Markets Work for the Poor (M4P)
Making Markets Work for the Poor is an approach to developing market systems so that they ‘function more effectively, sustainably and beneficially for poor people, building their capacities and offering them the opportunity to enhance their lives’ (Springfield Centre 2008, p. 25). It is based on the concept that as poor people are dependent on the market system for their livelihoods, changing markets to make them work for effectively and sustainably for the poor can improve livelihoods and reduce poverty. More accessible and competitive markets provide opportunities for poor people and can help them to find their own way out of poverty (Springfield Centre 2008, 2008b).
M4P activities aim to analyse and influence market systems that reach poor people as consumers, producers, and employees. They aim to facilitate change in the capabilities, incentives, and behaviour of market actors (Ruffer and Wach 2013), and include using marketing approaches to reach the poorest consumers (Heierli 2008). Examples of M4P working in practice include:
- FinMark Trust South Africa aimed to make financial services work more effectively for the poor by addressing the underlying causes of low access, including lack of information, poor stakeholder relationships and weak regulatory processes. Achievements include: contributing to a 7.1 million increase in ‘banked’ population; providing new information services; and creating a better innovation environment (SDC and DFID 2008).
- FIT-SEMA, Uganda sought to improve the quality and relevance of business-related radio programming by building the capacity and incentives of radio stations and other players (SDC and DFID 2008). The programme supported 25 radio stations, offered 50 new programmes and reached 7 million more listeners.
There is an emerging body of evidence looking at how private sector actors analyse poor men and women as a potential market segment. Case studies in various sectors – including solar lighting and micro irrigation – emphasise the utility of market segmentation, market research, and the ‘4Ps’: products, pricing, place and promotion (Heierli 2008).
M4P PrOpCom – Making tractors work for the poor
PrOpCom’s intervention in the Nigerian agricultural sector sought to support the mechanisation of smallholder farmers to boost production, achieve cost savings, and address some of the problems commonly encountered by poor smallholders, including declining labour supply and double season cropping opportunities being missed.
PrOpCom aimed to stimulate a new sales channel and equip private tractor owner-operators with greater choice. The pervasiveness of the Nigerian government in the country’s tractor market (as the principal buyer) placed a damaging split between tractor distributors and tractor owner-operators. PrOpCom facilitated change by working with companies to design and develop direct, private sales and distribution channels; oversee the implementation of new sales channels; expedite the expansion of the sales model and choice; and embed systematic change by encouraging evolution and quality improvements.
An internal impact assessment of the programme found that: service provision has been profitable; that tractor servicing has been deemed better than its predecessor; and that copying and crowding of the programme has occurred – indicating a wider buy-in than initially anticipated.
Source: PrOpCom (2013)
UNDP’s Inclusive Markets
Similar to M4P, UNDP’s Inclusive Markets approach aims to extend market choices and opportunities for the poor as consumers, producers and wage earners1. The aim is to create job opportunities, and affordable goods and services that are needed and used by poor people. UNDP’s approach focuses on entire sectors or sub-sectors, and aims to tackle various barriers to inclusive market development. UNDP’s role has varied from acting as a broker, facilitating linkages between civil society, public and private sectors, to acting as a project partner, providing technical assistance or policy advisory support and assistance (UNDP 2010). UNDP has produced a handbook on inclusive markets which provides guidance on identifying opportunities, formulating and implementing projects, and measuring result (UNDP 2010).
Opportunities for the Majority (OMJ)
Opportunities for the Majority was launched by the Inter-American Development Bank (IDB) in 2007. It aims to promote and finance market-based, sustainable business models that engage the private sector, local governments and local communities in the development and delivery of products and services. OMJ provides medium- and long-term loans and partial credit guarantees to support business models that benefit low-income populations in Latin America and the Caribbean. Priority sectors include financial services, housing, education, telecommunications, and health and nutrition.
Impacts
Limitations of evaluative approaches
Literature on the impact of market development approaches is limited and generally points to the challenges of achieving profits while reaching the poor. Experts note that there is a need for more rigorous evaluations of market development programmes (Sinha, Holmberg and Thomas 2013). In a literature review of market development approaches for SIDA, Sinha, Holmberg and Thomas (2013) note that few interventions have evaluated the outcomes and impacts resulting from programmes. The authors caution that some of the assumptions that underpin donor market development interventions are not well-supported by evidence (Sinha, Holmberg and Thomas 2013). A review of evaluation methods for M4P programmes finds that approaches have been weak in terms of triangulation, rigour of data collection, the development and use of theories of change, and a lack of consideration of unintended negative effects (Ruffer and Wach 2013).
Impact of programmes
Of the limited evaluations of programmes that are available, results have been mixed. An internal evaluation of the OMJ programme found that though there were some important successes – including building up a diverse portfolio– there were also notable challenges (Piza et al. 2013; IDB 2012). Initial results indicate a negative association between targeting low income beneficiaries and likely business performance, with worse business performance occurring on average in projects with better targeting (Piza et al. 2013). Some projects failed to specify which market or government failures they sought to address, making evaluation difficult. Evaluators recommend that the effectiveness and long-term sustainability of business models supported by OMJ must be monitored carefully (Piza et al. 2013; IDB 2012).
Some single case examples provide evidence of impact and lessons. The Katalyst programme in Bangladesh, for instance, aims to increase the income of poor men and women in rural areas. It does this by facilitating change in services, inputs and product markets to increase the competitiveness of farmers and small enterprises (Katalyst 2014). Some of the programme’s notable achievements include (Katalyst 2014):
- Working with a local non-profit business organisation, Katalyst trained famers, retailers and pesticide sprayers across the country in the safe and judicious use of pesticides. An impact assessment found that when farmers put this knowledge into action, their income increased.
- By facilitating public-private collaboration, Katalyst helped to improve farmers’ access to information and services.
- Katalyst partnered with the Rural Development Academy to develop and promote low cost quality compost among farmers. Local service producers were trained to disseminate knowledge of farmers and ensure its effective use at the household level.
Other examples of impact from the inclusive market programmes include:
- Increase in household incomes: UNDP supported a dairy value chain integration initiative in Armenia by brokering relationships between small-holder farmers and the private sector, contributing to the full renovation of milk collection centres, and purchasing two milk trucks. Initial results indicate a 20-25 per cent increase in the household incomes of beneficiaries (UNDP 2010, p. 11).
- Growth in micro-enterprises: UNDP Nepal, alongside the Nepalese government and local partners, developed an enterprise development programme that aimed to address rural poverty by engaging the population in entrepreneurial activities. Results show the programme has contributed to the growth of 46,000 micro-enterprises (of which 68 per cent are owned by women), created more than 55,400 jobs, and increased entrepreneurs’ income by 297 per cent on average (UNDP 2010, p. 20).
- Provision of financial services: The Pacific Financial Inclusion Programme – in partnership with UNDP, UNCDF, the EU and AusAid – expanded access to financial services to some of the region’s most excluded people, including rural and low-income women and micro-entrepreneurs. By the end of 2010, over 150,000 clients had been reached, 113 trainers trained and 48,000 people received financial literacy training (UNDP 2010, p. 12).
Lessons
A number of comprehensive operational guides have been produced with guidance, challenges, and lessons from market development programmes (Springfield Centre 2008b; Roduner, Schulz and Frangniére 2011; Emerging Market Economics 2008). Some of the lessons emerging from the literature include:
- Governance and local ownership: It is important to identify governance structures and promote local ownership. The willingness of stakeholders to exercise strategic leadership is a crucial factor in securing ownership (Emerging Market Economics 2008).
- Understanding local context: The positioning of programmes should take into account local context. In particular, what is causing markets to fail, the political economy and capacity of the state, and the behaviour of the private sector (Emerging Market Economics 2008).
- Flexibility: Due to the unpredictability of market conditions, flexibility in management arrangements, resource use, and the types of interventions is crucial to success (Emerging Market Economics 2008).
- Emerging Market Economics. (2008). Notes on MMW4P: DFID Resources. London: Emerging Market Economics Ltd. See document online
- Gibb, H., Foster, J., & Weston, A. (2008). Human rights and private sector development: A discussion paper. Ottawa: The North-South Institute. See document online
- Heierli, U. (2008). Market approaches that work for development: How the private sector can contribute to poverty reduction. Geneva: SDC. See document online
- IDB. (2012). Evaluation of the opportunities for the majority initiative. Washington, DC: Inter-American Development Bank. See document online
- Katalyst. (2014). Phase 2 highlights (2008-2013). Dhaka: Katalyst. See document online
- Piza, C., Cravo, T., Lodato, S., & Piers, J. (2013). Evaluation of the opportunities for the majority initiative. New York: Inter-American Development Bank. See document online
- PrOpCom. (2013). Making tractor markets work for the poor in Nigeria: A PrOpCom case study. Maitama-Abuja: PrOpCom. See document online
- Roduner, D., Schulz, C., & Frangniére, I. (2011). Facilitating change in M4P programmes (Working Paper). Bern: SDC. See document online
- Ruffer, T., & Wach, E. (2013). Review of M4P evaluation methods and approaches. London: ITAD. See document online
- SDC, & DFID. (2008). A synthesis of the making markets work for the poor approach. SDC/DFID. See document online
- Sinha, S., Holmberg, J., & Thomas, M. (2013). What works for market development: A review of the evidence (UTV Working Paper 2013:1). See document online
- Springfield Centre. (2008). A synthesis of making markets work for the poor (M4P) approach. Bern /London: SDC/DFID. See document online
- Springfield Centre. (2008b). The operational guide for making markets work for the poor (M4P) approach. Bern/London: SDC/DFID. See document online
- UNDP. (2010). Inclusive markets development: Handbook. New York: UNDP. See document online