This
blog post from the Institute of Development Studies (IDS) attempts to reflect the main challenges in implementing market-based approaches. It questions the "false assumptions" of market development and systems thinking for poverty reduction.
In fact, what is most evident is that a very damaging assumption held by policy makers and practitioners alike is that market-based approaches simply mean "business" and "market access". In fact these are two outcomes of a functioning market system - among many others - but not the end-goal. In reality, well-designed market-based approaches that adopt systemic principles also deliver the following benefits:
- Production and supply systems that respond to demand and the needs of the market so that relationships are inherently win-win and about capturing the value within the system
- Inclusivity of poor, marginalised, vulnerable groups as key actors and influencers (including, women, youth, disabled, etc.)
- Market resilience and the ability of the system to stay strong and react positively to economic, social, political shocks even after any development intervention
- Innovation is from within the market itself and emergence of new products and services (both for mainstream as well as niche users)
- Better relationships between market actors and market-driven design and testing and learning so that products and services respond to market needs
When talking about market-based systemic approaches to poverty reduction, the first step is for all parties to get on the same page. For advisors to development projects, these are some things to look out for:
- An inaccurate understanding of systemic thinking and a persistence towards value chain approaches. The former is about the structures, patterns and cycles in systems, and the systemic constraints that affect the functioning of a system (rather than any specific events or element or value chain). Systemic analyses then lead to solutions and leverage points that generate long-term change throughout the wider system (and not for any particular market actor value chain or sector).
- Visible conflicts between projects and market partners and disagreements around 'ownership' and 'control'. There can often be a tug-of-war between 'who does' and 'who pays'. The project may be doing too much and be paying too much and can be reticent to relinquish control and allow market forces and systemic pressures to take over.
- A lack of understanding of what a better functioning market system looks like. Poverty is often considered a 'wicked problem'. As a result, without diversity for multiple viewpoints in problem-solving, there can often be difficulty in envisioning a better future. Some projects also perceive that by formalising all things informal and turning informal activities into formal value chains will somehow naturally strengthen systems.
- A lack of appreciation for (and a fear of) complexity. As a result, there may be a pattern of efforts to simplify, delineate, isolate and control within specific timeframes and outcomes, leading to tick-box approaches to measuring systems change.
- A heavy emphasis on quantity over quality in project activities. In particular, a tendency to prioritise activities that promise large impacts for lots of beneficiaries as soon as possible ... over and above interventions at leverage points in the system that take time but draw people into the system and bring about sustainability through relationships, value creation, growth, feedback, market response and evolution
- A tendency to directly intervene in the market instead of employing facilitative approaches and market-based tactics. Examples:
- running 'project pilots' instead of working through market actors and offering opportunities for 'market exposure and idea testing'
- dragging actors into the market through 'cost-sharing' instead of supporting existing interest and willingness for 'early-stage market entry'
- organising and leading 'stakeholder forums' to get buy-in for the project's bright ideas instead of facilitating membership based groupings around common market constraints
- when buying down the risk in new markets, offering a heavy amount of 'financial subsidy' to businesses instead of non-financial options such as 'networking, capacity building, coaching, information-sharing and relationship-building'
- a lack of adequate focus on the incentives, relationships and behaviours in markets. This can be evidenced by projects that make broad assumptions about why the private sector does not already work in marginalised markets. e.g. ICT4Development projects often make the mistake that ICT constraints are primarily technical software issues, and do not spend enough time addressing the incentives and facilitating the relationships and interactions between firms and the market (mostly small rural-based enterprises).
