Market Systems Principles
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Market System Principles
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Transcript of Market Systems Principles
Market System Principles
Market System Principles • The interac4on of independent market actors to achieve a
specific purpose. – Short vs. long term – Exclusive vs. inclusive – Zero sum vs. expanding the pie
• System are complex – Influenced by other poli4cal & social systems – Individual incen4ves differ and this leads to… – Different interpreta4ons on how to behave
• Systems tend to form paHerns of behavior – Re-‐align all incen4ves around a common purpose of inclusive growth
– Can begin to predict and shape overall system behavior rela4ve to this purpose
Ra4onale for Market Systems Approach
Objec&ve: The interac&ons of inter-‐dependent market actors to achieve the purpose of inclusive growth Rela4onships Performance driven and more wide ranging
between market actors as characterized by trust.
Rules (formal and informal)
Creates condi4ons for driving on-‐going investments in improved performance.
Incen4ves Alignment exists between the enterprise, the market system and the individual
Capacity The know-‐how and know-‐who needed to seek solu4ons for growth in a constantly changing market context.
Workshop Objec4ve
To introduce par4cipants to key conceptual frameworks and opera4onal tools -‐-‐ in use by M4P prac44oners -‐-‐ for designing, managing and monitoring program/project investments using the market systems approach (aka M4P).
Workshop Agenda Day Morning
9:00 – 13:00 (30 m Break) Lunch 13:00 -‐14:00
A>ernoon 13:00 – 17:30 (30 m Break)
1 IntroducCon to the Workshop Market Systems Understanding
• Structure & FuncCon
• System Dynamics EvoluCon of M4P Approach
2 Market Systems Approach • Strategic Framework • Planning for Sustainability
FacilitaCon Strategy • Leverage
FacilitaCon TacCcs • Partner SelecCon
3 FacilitaCon TacCcs • Pathway to Crowding-‐In • Framing Offers (1)
FacilitaCon TacCcs • Behavior Change Principles/TacCcs • Offer (2)
Results Measurement Basics
4 Knowledge Management • Momentum • Data sources/uses • Results Chains
FacilitaCon Management • Implementers • Donors • Stakeholders
Summary/Review EvaluaCon
Understanding Market Systems
Market system defined Market System Picture (Sta8c)
Inter-‐connected markets Lessons from Prac8ce
Markets: from theory to reality • Markets are a medium for exchange “Set of arrangements by which
buyers and sellers are in contact to exchange goods or services”
• In economic theory, markets work efficiently when key assump4ons hold Ra8onality, informa8on, incen8ves, compe88on, externali8es etc
• When assump4ons don’t hold – ‘market failure’ results
In real world, effec8ve markets find ways of dealing with failures – market systems
• In development, we can’t simply assume problems away We need a more prac8cal, view of how market systems work (or don’t)
• Key element is transac&on
What brings supply and demand together?
Springfield Centre | Making markets work
From transac4ons to a market system
SUPPORTING FUNCTIONS
RULES
Laws Standards
Informa8on
Demand Supply CORE Input Supply
Produc4on Processing Retailers Wholesale
IncenCve Capacity
RelaConships
The market system…mul4ple func4ons
• The core The point of transac8on: relates to delivery of some form of good, service or func8on -‐ the inter-‐face between consumer and supplier
• The rules The rules of the game: govern and shape incen8ves, behaviour, prac8ce of both the core and suppor8ng func8ons
• The suppor&ng func&ons Enable the core delivery to take place, act as transmission mechanisms for rules to be effec8ve
• … And of course, different private and public players performing/financing these different roles
... and mul4ple players
Demand Supply
SUPPORTING FUNCTIONS!
RULES!
Information!Related services!
Infrastructure!
Informal rules & norms!
Laws!
Standards!
Regulations!
CORE!
Private sector
Government
Civil society
Membership organisa8ons
Informal networks
Representa8ve bodies
Inputs ProducCon Processing Retail Wholesale
Rice
Supply Chain Mgmt
…market systems are inter-‐connected
Inputs
Timely access to products & services!
Community Agents
Seeds
Appropriate Research!
On farm trials
Group Task: Market System Matrix Select a sector in which Musika works. Brainstorm answers to these ques8ons: 1. What are core func4ons – raw materials to finished product/
service – and who performs them in markets in which you are working:
2. What key support func4ons are required for market performance? 3. What rules – formal and informal –influence the market
performance? 4. What market actors -‐-‐ private, public, NGO, member-‐based
associa4ons – perform support func4ons and rules? Prepare flipcharts and be ready to present in plenary: 1. Draw the links between the core func4ons (value chain) 2. Draw a donut making sure to separate func4ons (in the donut)
with players (outside the donut) 3. Circle the market func4ons where you are working
History of TNS in Kenya Dairy Development
Demand Supply
SUPPORTING FUNCTIONS!
RULES!
Information!Related services!
Infrastructure!
Informal rules & norms!
Laws!
Standards!
Regulations!
CORE!
Inputs ProducCon Processing Retail WholesaleFarmer Capacity: skills, informa4on, linkages
Aggrega4on: Dairy Hubs for chilling/services
Livestock Gene4c Society
Industry Associa4ons –Milk Traders
Kenya Dairy Board Livestock Gene4c Society
Feed, Breed, Vet Firms Rural Banks
Packaging Companies Professional Mgmt Services
Kenya Dairy Board
ProducCon
Dairy Farming as a Business
History TNS Dairy
Markets
Lack of Access to Better Markets!
Aggrega&on thru Dairy Hubs
Feed
Limited Access to Quality Hay!
Cer&fied Commercial Hay Producer
Lack of technical/business skills of farmers!
Understanding Market Systems
Market System Dynamics PaHerns of Behavior
Market System Dynamics How do people relate in market systems? • Compete
• Cooperate Demand Supply
SUPPORTING FUNCTIONS!
RULES!
Information!Related services!
Infrastructure!
Informal rules & norms!
Laws!
Standards!
Regulations!
Market System Dynamics
• On-going upgrading that meets/exceeds industry standards
• More inclusive participation and benefit flows
What defines effective market system performance?
Limited Growth with no Poverty Reduction
Inclusive Growth
Demand Supply
SUPPORTING FUNCTIONS!
RULES!
Information!Related services!
Infrastructure!
Informal rules & norms!
Laws!
Standards!
Regulations!
Group Task
• Choose one person in your group to read out each ques8on. Once your group has discussed the ques8on, the person then reads out the next ques8on.
• There is no need to read out all the ques8ons first. Rather have a discussion before proceeding to the next ques8on.
Drivers of System Change: Compe44on and Coopera4on
What are some paHerns of behavior in market systems?
Bad
Best
Better
Bad
Best
Better
Competition Cooperation
Degree of Market System Effectiveness
LOW
HIGH
HIGH HIGH
Transparent rules Embedded Services
Collusion
Zero-‐sum tac4cs Poli4cal Favori4sm
Joint response to opps. & threats
Norm: Constant upgrading
An4-‐compete rules
Joint Marke4ng
Norm: Constant upgrading
Compe44ve response internalised
Specialised Services Innova4on/Differen4a4on
Have you heard? (PLENARY + PAIRS EXERCISE)
TASKS: • For each statement answer these ques4ons:
– Who is the rela4onship with? – How would you describe the nature of the rela4onship? – What does the statement imply about the nature and
degree of compe44on and/or coopera4on? – Are there any rules that may have influenced the
statement? – What would you like to hear more olen in the future?
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Farmer Quotes (plenary)
1. “When my neighbor does well it is a reflec8on on his selfishness and he should act more like the rest of the community”
2. “We have tried to pool our money to buy larger amounts of inputs to get a beUer deal, but we couldn’t get it to work as many of us could not hold cash long enough to get organized”
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Processor Quotes
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1. “I want to source more paddy from small farmers, but I have had trouble with a few traders thinking short-‐term and chea8ng me so I am not sure how to start”
2. “I need to generate loyalty with my farmer suppliers
and limit side selling buying, so embedding services and providing performance incen8ves should help keep my mill u8lisa8on rates high”
Input Provider Quotes
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1. “I know my future depends on smallholders, but I don’t know how to get to my future and it seems too far away”
2. “I heard another input firm on the radio, so I
called my cousin in the tax authority to check on how they can afford adver8sing”
Comfort Zone: -‐ Actor’s history/context -‐ Ra4onal self interest
-‐ Readiness to try a new way
IncenCves: -‐ Economic (yields,
income) -‐ Social (reputa4on,
pres4ge)
Higher Potential for Adoption of New Ideas
Drivers for System Player Change
Incremental Risk: -‐ Quick wins from
taking a risk -‐ Track record of embracing risk
-‐ Managing risk of upgrading
Pace of System Player Change Speed or pace by which system players adopt new ideas
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Innovators Early Adopters Early Majority Late Majority Laggards
FAST SLOW
Innovators: High risk fits easily in comfort zone Early Adopters: Comfortable taking risk on new idea provided adoption preserves their status as “opinion leader” in community.
Early Majority: Waits for others to adopt/benefit to be in comfort zone Late Majority: Sceptics w/discomfort to adopt unless majority have done so
Laggards: Tradition bound w/ high degree of discomfort to adopt new ideas
• Recent “surge” in interest, but based on collec4ve learning from 30+ years
• Origins linked to academic enquiry:
• Ins4tu4onal and behavioural economics • Systems thinking • Compe44veness • Dependency theory
Origins/Evolution of the Approach
Click to edit Master 4tle style
Sustainability concerns lead to market development or market systems thinking.
Evolution of the Approach
Limita4ons of microfinance alone drives emergence of subsector analysis, market linkages, non-‐financial support for SMEs (BDS) and secondary issues.
Focus on alterna4ve technologies and microfinance for rural poor.
Increasing emphasis on defining sustainability more dynamically in terms of resiliency, adapta4on and solu4on thinking. Cross -‐sectoral learning from applica4on in other sectors.
1980s 1990s 2000s 2010/Going forward
• Predominantly used in agricultural market systems
• However, increasing applied to other sectors:
• Public-‐private dialogue and business advocacy (ENABLE Nigeria)
• Financial services (FSD Kenya)
• Infrastructure (Kenya MAP -‐ water)
• Land (GEMS3)
• Health (hfp://www.futurehealthsystems.org)
• EducaCon (Liberia ACE)
• Gender (MEDA)
Application of the Approach
Click to edit Master 4tle style Four Underlying Principles
Determining a cataly4c purpose for the development agent that s4mulates, but does not displace, market func4ons or players
Understanding how and why markets func4on to the detriment of the poor, and fostering a systemic shil to affect how the poor par4cipate in and benefit from market systems
Delivering sustainable outcomes by beHer aligning key market func4ons and players with the incen4ves and capacity to work more effec4vely
Targe4ng interven4ons that foster systemic change, impac4ng large numbers of poor people
1 Understanding the
system
2 Pro-‐poor
sustainable change
3 Large-‐scale impact
4 FacilitaCve approach
Why are these Principles Important? High-‐le
vel Impa
ct
Time Project LifeCme
Phase 1 Phase 2 Phase 3 Phase 4
Market systems project impact profile Direct interven4on impact profile
Example: Uganda rural SMEs constrained by lack of informa4on
Out
reac
h
Time
Project AProject B
2 projects Project A: 1999--; US$2.5m/3 yrs; est. av. $0.5m/yr
Project B: 1999-2007; ~US$1.2m
Goal Increase info for rural MSEs “Info is a long term strategic public
good”
Establish sustainable, effective info for rural MSEs via the mass media
Outreach 7m regular listeners Peak of 7-8m listeners
Sustainability 25 stations with independent MSE programmes; emerging new programmes & support services: no donor funding
Initially 10 stations but dissemination cut as funding cut
to $50k/yr. Other activities remain donor funded
What explains the difference?
Rationale Provide information to MSEs Make commercial media work better for MSEs in rural areas
Understanding Symptoms: what info do the poor need?
Causes: understand structures, prac4ces, incen4ves of media system – why not pro-‐poor?
Sustainability Explicit: commercial, based on local ownership & incentives, appropriate for local context
Unclear: “A long term strategic public good”, but no assessment of
govt capacity or incen4ves
Action 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
