Facilitation overcomes systemic market challenges

When healing broken or fragmented markets, iDE considers the entire market system through a rigorous investigation. Recognizing the interdependence of various actors and identifying all the root causes, we intervene at many different levels, including:

• Build the capacity of the private sector, including training small producers in basic business practices
• Mitigate corporate risk through market research and development
• Increase the flow of market information, including information about weather and commodity price fluctuations
• Work with financial institutions to increase access to affordable loans
• Work with the local government to promote policy changes favorable to business and agriculture
• Introduce new or adaptive technology
• Build relationships and strengthen business connections at critical points on the value chain

The only qualifying criteria necessary to choose market facilitation over a social enterprise approach is the existence of a supply chain for the product or service in question with multiple competitors. iDE phases out as these relationships strengthen.

Comparing Market Facilitation with Social Enterprise

Advantages:

Market facilitation works with an existing, established market. In a social enterprise model, the process of convincing investors of a market opportunity is difficult as there is a prevailing belief that if there was enough demand for a product, a market would have formed on its own. Although this mindset often confuses the absence of demand with the many start up challenges local entrepreneurs face, it is still a perceived risk by donors and investors that a market facilitation approach avoids.

Disadvantages:

One of the biggest challenges of market facilitation programming is the implementing organization's lack of control over the behavior of market actors. It can often be more difficult to remedy bad practices and relationships that have been in place for a long time than to start a new venture. It is also difficult to encourage strategies that market actors may consider risky as compared to a social enterprise approach in which the risk is one’s own.

There is also no way to know for sure if market actors will continue with behaviors encouraged during the project period. No matter how well aligned solutions may be to the financial incentives of actors, human beings are motivated by complex reasons. Though many market actors may be compelled by financial gain, others may prefer convenience, or following tradition.

Vietnam Case Study: Working with the government to scale productive water

For SDC’s Scaling Up Productive Water project in the Ninh Thuan province of Vietnam, iDE used a market facilitation approach identifying one wholesaler that works with 11 retailers to supply micro-irrigation. iDE worked to strengthen the operations of these retailers—identifying promotion and technical advisory services as the biggest challenge to sales.

iDE works closely with the Vietnamese government—the most viable market actor—facilitating the Farmers Union to actively promote micro-irrigation technologies and train farmers in correct installation and use.

Promotional activities carried out included technology demonstrations, village sales meetings, and dissemination of information on micro-irrigation technology through communal loud-speaker systems. The Farmers Union attracted visitors to project areas from agriculture departments, provincial offices, and lead farms from nine central, central highland, and southern provinces of Vietnam.

These activities helped ensure all 11 retailers operated with a profit, as sales surpassed optimistic targets. As a result of the profit and promotion across other provinces, the wholesaler was also able to expand their business to other provinces.