The proper functioning of markets can serve as an efficient tool that boosts the allocation and coordination of resources as well as the exchange of goods and services within an economy. Well-established markets foster competition and provide incentives for investments. They lower the costs of doing business that enable growth and reduction in poverty. In a nutshell, markets act as engines that bridge the gap between the wider economy and people living in poverty. The functioning of markets and their performance, to a great extent, determine the growth patterns and the speed of poverty reduction. But markets not always function properly – sometimes they fail. Due to these failures, the marginalized groups are the ones who suffer the most and are left out due to the social and economic barriers presented.
As a result of these failures, governments and non-for-profit organizations have recognized that market outcomes are not always pro-poor. But some of the traditional market interventions have only had a negative effect on the economy. The intervention irregularities have only impaired the efficiency of resource usage and stalled the overall growth. As a consequence, a new international development approach has emerged – the Market System Development (MSD) approach, known also as M4P – which seeks to address the underlying causes of market dysfunction by indirectly facilitating the business environment so they can operate more effectively, sustainably and beneficially for the poor. This leads to reduced poverty, sustainable change and improved livelihood opportunities for all groups, especially poor and marginalized groups.
There are five important features of the MSD approach, however, in this article, we will provide an overview of the implementation processes of an MSD program.
Strategic Framework – This is the initial stage where all the parameters for the program are established. This is the stage where the target group is defined based on an in-depth analysis that determines where the target group is, namely where the poor people are, their occupation and gender. An example of a potential target group may be female farmers living in rural areas.
Understanding of the market system – Once the implementation team is ready to take action, opportunities that have been identified in the strategic framework can become better defined. This is derived from the knowledge gained from market players, as well as the information gathered in the market regarding opportunities, incentives, and constraints in specific sectors.
Defining the sustainable outcome – During this stage, a defined vision and strategy regarding how the intervention will lead to sustainable change in the lives of the poor will be established.
Facilitating change – In this stage, partnerships and implementation of interventions begin. This is not predefined, as the context always changes, depending on who the market actors are, and what are the market system opportunities and constraints. The key role of any MSD program in this aspect would be, for example, to provide technical assistance of any kind in improving the old practices or introducing new ones, provide reports on the market demands and supply, introduce new and innovative business ideas, etc. It is crucial for MSD programs to facilitate change within the market system and not become part of the system itself. The idea is to simply be ‘one-time’ interventions and not ‘ongoing subsidies’.
Access change – With MSD programs, monitoring and measurement of results are of key importance to access the success of inventions. Without having a proper monitoring system, it will be rather difficult to measure to what extent the intervention has benefited the poor. Thus, each intervention should be mapped out in a result chain, along with the indicators for each intervention and this results chain shall be updated constantly from the ongoing monitoring.
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