Making Markets work for the Poor (M4P). DFID’s experience. Structure of this presentation. What M4P is and why it matters DFID involvement M4P in practice M4P issues Proposed next steps. 1. What M4P is.
Making Markets work for the Poor (M4P) DFID’s experience
Structure of this presentation • What M4P is and why it matters • DFID involvement • M4P in practice • M4P issues • Proposed next steps
1. What M4P is... • M4P: temporary and catalytic interventions to overcome the main failures and constraints in markets that are important to the poor • influencing the development of market systems so that they offer increased opportunity and benefits for poor people • M4P features: Systemic and institutional change; the use of market-based incentives to leverage the “enterprise” contribution to development and ensure sustained impact • Successful M4P interventions lead to sustained pro-poor growth, and better opportunities, incomes and choices for poor men and women
M4P– key features • The systems around the poor • Large-scale • Causes not symptoms Aimed at Systemic change • ‘Close’ knowledge of: • functions and players • constraints and opportunities Based on an understanding of Market systems • View of the future shapes interventions now • Who does’/‘who pays’ framework A strong emphasis on Sustainability Implementation through Facilitation • Crowding-in other market players and activity • Key principles and frameworks Overarching approach Applicable to wide range of situations and using many tools
…and why M4P matters • Well functioning markets that support competition and lower the costs of doing business provide incentives for trade and investment leading to growth and poverty reduction • Markets a key linkage or “transmission mechanism” between the lives of the poor and the wider growth and economic integration process. • New data (“the next four billion”) describes a substantial, poorly served, informal, and hence inefficient and uncompetitive market at the base of the pyramid. • Markets often don’t work well for the poor, excluding them from the benefits of growth. Informality is a “poverty trap”. • M4P a means to ensure growth is pro-poor growth.
2. DFID involvement • 2000 framework paper • 2006 lesson learning • 2008 M4P at core of DFID private sector strategy • 2008/09 M4P knowledge management initiative • South Africa – FinMark, ComMark, LandMark • Kenya, Nigeria, Uganda • Bangladesh – Katalyst • Vietnam • Nicaragua, Bolivia
Rationale 1. Inclusive growth is the best way to get people out of poverty and is the exit strategy for aid. Growth driven by private sector investment and productivity. Well functioning markets that support competition and lower the costs of doing business provide incentives for trade and investment 2. The poor are dependent on poorly functioning inefficient markets for the livelihoods. • M4P a practical way to contribute to shared growth?
Understanding BOP markets“the next four billion” • Significant Unmet Needs • (telecoms, finance, housing, health, transport) • Dependence on Informal or subsistence livelihoods – a poverty trap • the BOP penalty – the poor pay more
M4P and Growth Diagnostics Trade regime Sustaining Growth Infrastructure Microeconomic risks – tax, corruption, crime, property rights Macroeconomic Stability Political Stability Market failures e.g. finance, information Market coordination failures e.g. agriculture and processing
M4P interventions in relation to market failures (meso/micro)
3. M4P in practice • Setting Strategic Objectives – inclusive growth, poverty reduction • Understanding market systems and how they affect the poor • Identifying constraints and systemic change objectives • Temporary and catalytic market development interventions – portfolio approach? • Monitoring, learning, feedback “influencing the development of market systems so that they offer increased opportunity and benefits for poor people”
Which poor? Which markets? Producers, consumers, employees
Diagnostic process Incentives Capacity Relationships
Using different tools Symptoms Causes The poor and their context Socio-economic studies, census data, poverty assessments, livelihoods analysis, investment climate surveys, competitiveness analysis, drivers of change Specific market system Systemic constraints Access frontier, value chain analysis, consumer research, productivity studies, regulatory reviews, organisational appraisal tools, stakeholder analysis, participatory tools Intervention focus Focused interaction with informants, interviews, focus group discussions, brainstorming
M4P: delivering significant, sustainable change • Vegetable value chain in Bangladesh • Higher outputs and productivity amongst 1m vegetable farmers • Systemic changes • Better farming practices, resulting from ... • ... Improved information flows through input retailers • Training supplied by input suppliers • Changing the input supply business model • Financial services in South Africa • Higher access: 39% (8.8m) in 2002 – 60% (19m) in 2007 • Systemic changes • New commercial information source • Improved regulatory processes • Better coordination • Improved innovation processes Coordination New M4P “models” in Vietnam Making carbon markets work for the poor; small-scale infra services Dairy sector in Armenia Doubling output, securing market access, tripling incomes for 2000 farmers Small wool farmers in S Africa Improved access to services and higher incomes for 5,000 farmers
4. M4P issues • Improving usability: perceived complexity, lack of instruments, “linked” or inter-locking markets • People, people, people: market for M4P services? • Political economy of multi-stakeholder approach • Measurement of systemic change in markets and development impact • Time scales and capacity to spend • Over design – under implement: donor incentives • Risk: Portfolio approach – accountability and flexibility, based on good M&E • M4P and the “Grand Challenges”
5. Next Steps? • Better knowledge management and learning from positive experiences on the ground • Further refining the M4P approach, making it easier to understand and more compelling • Sharper definition of “core M4P products” • Deeper integration of political economy approaches • Gaining more buy in from Governments, civil society and other donors • Attracting more direct participation from the private sector • Building advocacy capacity and alliances with “change agents” • Better understanding of M4P impact and potential contributions to growth strategies