MIFIRA Framework Lecture 2 Response analysis and MIFIRA

1. MIFIRA FrameworkLecture 2Response analysis and MIFIRA Chris Barrett and Erin Lentz February 2012

2. Lecture Overview: Response analysis and food insecurity • Changing political economy of aid distributions • What is response analysis / when is it needed? • What are the benefits and costs of different transfers? • Key defintions • MIFIRA is one such approach to response analysis: Two framing questions and associated subquestions. • Scales of analysis

3. Changing political economy of aid distributions • Shifting from donor driven to respondent driven • Increasing donor flexibility • Growing interest in local and regional procurement • Creates choice when responding to food insecurity: • Cash and vouchers; • Food procured locally and regionally (LRP); • Transoceanic food aid. • The increasing availability of choices means that agencies need better assistance in understanding response analysis.

4. How do Managers / Programmers Make Decisions: Situating Response Analysis within the Programming Cycle* Program Implementation Needs Assessment Response Analysis Response Planning Monitoring and Evaluation *Resource appropriateness requires ongoing market analyses

5. Objective of Response Analysis Response Analysis links identified need with appropriate response • Evidence-based to support decision-makers • Analyze the likely impact of alternative responses

6. The Programming Cycle: Information Gathering, Planning and Analysis, and Implementation Source: Barrett et al. 2009

7. Role of programming cycle Prior to commencing MIFIRA, undertake a needs assessment. Need to know (provisional) answers to: • The subpopulation of interest: who is food insecure? How many people fall into that subpopulation and where are they? • What does this subpopulation most need and how much of it do they need?

8. Why the Form of Transfer Matters • Getting the form of transfer right helps livelihoods… • Households sell food aid - often at a deep discount - to purchase what they need • Yet, when markets are not functioning, cash is of limited value. • … and minimizes harm to markets • Impact on markets depends on: • Total amount distributed • Meets needs of households - demand • Seasonality • Type of transfer • Functioning of local market

9. Comparing Cash and in-Kind Food Transfers Source: Barrett et al. 2009

10. Comparing Local or Regional Purchases and Transoceanic Sourced Food Aid LRP procured food generally recommended when: • Time is of the essence. LRP tends to arrive faster than transoceanic food aid. • May be able to time deliveries to coincide with the lean season, minimizing production disincentives. • Potential for cost savings, especially for bulkier products, such as grains and pulses Transoceanic food aid generally recommended when: • Concern that procuring food will cause inflationary pressure in source markets • Concern that traders will default on tenders or will drive up prices in anticipation of agency purchases • Concern that quality and safety standards cannot be met with LRP food Source: Barrett et al. 2009

11. Food Insecurity:Identifying responses • How to choose the most appropriate transfer? • Tradeoffs across each transfer • Many of the costs and benefits of the various transfer options are contingent upon markets. • Understanding markets’ roles in addressing food security can lead to designing better social transfer schemes in programs • Important non-market factors

12. What is a “market”? • Markets are composed of: • Buyers • Sellers • Institutions and infrastructure • Others behind the scenes: importers, processors, storage owners, wholesalers, credit suppliers, government officials and policies • Relative functioning of a market depends on: • Number, size, independence of buyers and sellers • Formation of prices • Availability of information on prices and costs • Ease of entry and exit • Relative functioning of a market system depends on: • Reliability of contract enforcement • Integration across markets • Institutional framework (infrastructure, government policies, etc.)

13. Market Vocabulary Source: FEWs (2008) Market Analysis and Assessment. Lesson 1, p. 12.

14. Commodity Channels Vocabulary Source: FEWs (2008) Market Analysis and Assessment. Lesson 1, p. 5.

16. Q1. Are local markets functioning well? • 1a. Are food insecure households well connected to local markets? • 1b. How will local demand respond to transfers? • 1c. How much additional food can traders supply at or near current costs? • 1d. Do local food traders behave competitively? • 1e. Do food insecure households have a preference over the form/mix of aid they receive?

17. First MIFIRA question, “Are local markets functioning well?” Source: Barrett et al. 2009.

18. Tracing out Different Supply Patterns Source: Barrett et al. 2009.

19. Q2. Is There Sufficient Food Available Nearby To Fill The Gap? • 2a. Where are Viable Prospective Source Markets? • 2b. Will Agency Purchases Drive up Food Prices Excessively in Source Markets? • 2c. Will Local or Regional Purchases Affect Producer Prices Differently than Transoceanic Shipments?

20. Second MIFIRA question,“Is there sufficient food available nearby to fill the gap? Source: Barrett et al. 2009.

21. Scales of Analysis and Complementary Agency Analysis Capacities Source: Barrett et al. 2009.

22. Resource Transfer Choices or Combinations Will Make a Difference • Cash transfers and vouchers to support purchasing power and local markets, quickly • Local procurement to energize local markets and use local food products • Cash and local purchases to strengthen local food chains and support smallholders • Food aid to support people during combined availability and market failures