The M4P Approach

1. Rationale, issues and opportunities The M4P Approach The Springfield Centre The Making Markets Work for the Poor Approach (M4P) What it is and where it’s going A 1-day seminar sponsored by DFID and SDC Bangkok, November 2008 Springfield Centre | Making markets work

2. 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 M4P Springfield Centre | Making markets work

3. Structure • Rationale and origins (the why) • What it is • How M4P works in practice • Taking M4P forward But before that, an example ........ Springfield Centre | Making markets work

4. Case study: Uganda rural SMEs constrained by lack of information Project B: 1999-2007; ~US$1.2m Project A: 1999--; US$2.5m/3 yrs; est. av. $0.5m/yr 2 projects Establish sustainable, effective info for ruralMSEs via the mass media Increase info for rural MSEs “Info is a long term strategic public good” Goal Outreach Peak of 7-8mlisteners 7mregular listeners Initially 10 stations but dissemination cut as funding cut to $50k/yr. Other activities remain donor funded: 24+ stations with MSE independent programmes; emerging new programmes & support services: no donor funding Sustainability Springfield Centre | Making markets work

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

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

7. The essence of the market development approach The explicit objective of more effective and more inclusive market systems and of the facilitating role of development agencies Rationale and objective 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

8. Structure • Rationale and origins (the why) • What it is • How M4P works in practice • Taking M4P forward Springfield Centre | Making markets work

9. Rationale and origins The real world The development world The market development approach (M4P) Conceptual thinking M4P In practice Springfield Centre | Making markets work

10. The origins of market development In different spheres of development, similar experiences… Health Agriculture “Key systemic reasons for suboptimal functioning of health systems are .... disjointed engagement of the private sector in delivering health care” Spinaci et al “The key requirement is to engage “in ways that are non-distorting, market-oriented and capable of generating net benefits for the poor” Joffe et al Business services “The objectives of outreach and sustainability can only be achieved in well-developed markets for business services” Donor Committee Business environment reform “Because the problem of poor business environments is systemic, genuine solutions must also be systemic” Jacobs Livelihoods Financialservices “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

11. Across all development fields… two common problems Impulsive Interveners Remote Reformers • Direct provision of subsidised finance, advice, materials etc. • If the markets not working, do it yourself. • Replace the market (at least in the short-term) • Priority – overall, distant macro-picture • Get prices right and the supply-side will follow • Standard policy prescription Bring about final ends (but neglect market means) Ignore appropriate roles of key players Failure to recognise institutional realities M4P has emerged from this context United by failure to ground what they do in: (1) market realities (2) the way systems work (3) a clear vision of how they can work better Springfield Centre | Making markets work

12. Structure • Rationale and origins (the why) • What it is • How M4P works in practice • Taking M4P forward Springfield Centre | Making markets work

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

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

15. 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

16. The market system SUPPORTING FUNCTIONS MARKET PLAYERS Private sector Government Demand Supply Business membership organisations Informal networks RULES Not-for-profit sector Information Infrastructure Related services Informing & communicating The cause of poor performance here ..... .... lies here CORE Setting & enforcing rules Informal rules & norms Regulations Standards Laws Springfield Centre | Making markets work

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

18. Interconnected market systems shoes agro- processing etc bicycles garments business services telecommunications financial services etc SUPPORTING FUNCTIONS CORE ? RULES SUPPORTING FUNCTIONS ? CORE RULES Springfield Centre | Making markets work

19. Now Future Ambitious Realistic Valid Operationalising sustainability

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

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

22. An overarching approach - using different tools Symptoms Causes 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 Springfield Centre | Making markets work

23. Structure • Rationale and origins (the why) • What it is • How M4P works in practice • Taking M4P forward Springfield Centre | Making markets work

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

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

26. Main steps along the pathway to crowding-in 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

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

28. Structure • Rationale and origins (the why) • What it is • How M4P works in practice • Taking M4P forward Springfield Centre | Making markets work

29. 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? How can environmental concerns be embedded into market systems? Do the poor always ‘win’ from market change? ...... we know something but we’re still learning Springfield Centre | Making markets work

30. Strategic and operational challenges ....... How does M4P fit within funding structures and mechanisms? Where should facilitators be positioned? What evidence is needed to make a better case for M4P? What are the structural options for facilitators? How can M4P be made more ‘saleable’ to decision-makers? How can ‘good practice facilitation’ be better transferred? How long should facilitators ‘stay’ in weak markets? Springfield Centre | Making markets work

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

32. M4P in practice: delivering significant, sustainable change • Vegetable value chain in Bangladesh • Higher outputs and productivity amongst 1m vegetable farmers • Systemic changes • Better farming practices, resulting from ... • ... Improved information flows through input retailers • Training supplied by input suppliers • Changing the input supply business model • Financial services in South Africa • Higher access: 39% (8.8m) in 2002 – 60% (19m) in 2007 • Systemic changes • New commercial information source • Improved regulatory processes • Better coordination • Improved innovation processes Coordination Dairy sector in Armenia Doubling output, securing market access, tripling incomes for 2000 farmers Water users in Somalialand Better quality and reliability for 3,000 users Small wool farmers in S Africa Improved access to services and higher incomes for 5,000 farmers Springfield Centre | Making markets work

33. An agenda for taking M4P forward? What needs to be done now to ensure that the potential gains from M4P are realised? A key focus for this workshop (which we return to the afternoon) Collaboration Learning Communication Promotion Exchange Skills development Evidence • A new resource in going forward - • three new public documents • The Synthesis • The Perspectives • -The Operational Guide Springfield Centre | Making markets work