When seeking ways to create large scale and lasting economic impact for the poor, it is crucial to identify and address the root causes of market failure.
Traditional development programming, which focuses large amounts of resources on asset transfers, realize gains during the project period but are often criticized as being unsustainable. By distributing products and providing services for free, these programs often harm the competitiveness of existing market services and render target groups as beneficiaries of ‘aid’ rather than autonomous consumers with agency over their own social and economic enhancement. [Footnote 1]
Market systems development programming, on the other hand, is aimed at creating systemic change to better involve poor people in the economic growth of their country and make their own path out of poverty. [Footnote 2]
The Making Markets Work For the Poor (M4P) approach, in particular, provides a framework to map out value chains, supporting services, and the environment in which markets operate to identify the unique root causes of market failure in each context. [Footnote 2]
The Scaling Up Productive Water Project
iDE began with its market facilitation approach (which utilizes some of the principles of M4P) during the implementation of the Scaling Up Productive Water project for the Swiss Agency for Development and Cooperation (SDC). iDE took the time to listen to every stakeholder—the suppliers, producers, retailers, end users, and others who might have an influence on the end customer—to create a holistic understanding of the links on the value chain and the roles of each market player. iDE then developed business solutions that made new connections and strengthened existing connections to achieve a more robust market ecosystem. These solutions were not the same across project countries; rather, these solutions were tailored to the conditions and needs of each market.
After conducting these market investigations in each of the project countries, iDE found that there were no existing commercial supply chains in place for smallholder drip irrigation solutions. iDE supported several different business models in various markets to bring drip irrigation to scale—ranging from acting purely as a market facilitator on one end of the spectrum, establishing its own social enterprise on the other, to investigating both options.
Market engagement requires a spectrum of approaches. At iDE, we are not ideologically committed to one approach, but analyze the market to identify whatever is necessary to best accomplish our goal of increasing incomes and improving livelihoods for the world’s poorest populations.
Holling, C. S., 1986. The resilience of terrestrial ecosystems: local surprise and global change, in Sustainable Development of the Biosphere. Eds: W. C. Clark and R. E. Munn, pp. 292-317. Cambridge: Cambridge University Press. Download page: Book available as PDF at IIASA
Holling, C. S., 1996. Surprise for science, resilience for ecosystems, and incentives for people. Ecological Applications, 6(3), 733-735. DOI: 10.2307/2269475