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Market facilitation concepts

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  • 1. MARKET  FACILITATION  CONCEPTS  
  • 2. MARKET  FACILITATION   What  is  it?   Is  an  ac4on  or  agent  that  s4mulates  the  market   system  to  develop  and  grow,  but  does  not  become   part  of  it   2
  • 3. Facilita4on  Concepts   Why:  to  increase  the  compe00veness  of  the  whole  industry  over  0me   by:   o  Fostering  systemic  shi<s  towards:   §  broader  and  deeper  commercially  grounded  rela0onships   §  ongoing  innova0on/upgrading   §  benefit  flows  that  drive  shi<s  in  rela0onships  and  innova0on   o  Fostering  improvement  in  cri0cal  end  market  factors  –  product,   opera0ons,  branding   How  to:     o  Appropriate  intensity  (i.e.  role  and  resources  of  project)   o  Foster  local  rela0onships  –  buying  down  risks   o  Self  selec0on  of  project  partners  -­‐-­‐  rolling  exit  to  test   rela0onships  and  ownership   3
  • 4. WHY?  APPLIED   Problem  statement:  The  rice  value  chain  relies  on  smallholder   produc4on,  but  cannot  compete  because  of  the  low  produc4vity  of   par4cipa4ng  smallholders   Why  Ra4onale   Farmers  performance  is  due  to   lack  of  capacity  and   untrustworthy  private  sector   actors:     •  Project  provides  output  and   input  services  directly     Ugly Bad Good 4
  • 5. WHY?  APPLIED   5 Problem  statement:  The  rice  value  chain  relies  on  smallholder   produc4on,  but  cannot  compete  because  of  the  low  produc4vity  of   par4cipa4ng  smallholders   Why  Ra4onale   Farmer  performance  is  due  to  knowledge   and  capacity  gaps  that  result  in  limited   effec0ve  rela0onships  with  output  market   actors:     •  Project  assists  in  building  output   rela0onships,     •  Project  provides  direct  training  to   smallholders     •  Project  provides  free  or  highly   subsidized  inputs     Ugly Bad Good
  • 6. WHY?  APPLIED   6 Problem  statement:  The  rice  value  chain  relies  on  smallholder   produc4on,  but  cannot  compete  because  of  the  low  produc4vity  of   par4cipa4ng  smallholders   Why  Ra4onale   Farmer  performance  is  due  to  limited  and  ineffec0ve   rela0onships  on  the  output  and  input  sides  of   produc0on:   •  Project  assists  output  firms  to  provide  market   requirements  maybe  through  improved  aggrega0on   services     •  Project  assists  input  firms  to  extend  distribu0on   networks  to  the  smallholder  market  with  a  focus  on   solu0ons  (i.e.,  informa0on  and  services)   •  Project  works  with  radio  and  local  fes0vals  to   improve  knowledge  flows   Ugly Bad Good
  • 7. Facilita4on  Concepts   Why: to increase the competitiveness of the whole industry over time by: o  Fostering systemic shifts towards: §  broader and deeper commercially grounded relationships §  ongoing innovation/upgrading §  benefit flows that drive shifts in relationships and innovation o  Fostering improvement in critical end market factors – product, operations, branding How to: o  Appropriate intensity (i.e., role and resources of project) o  Foster local relationships – buying down risks o  Self selection of project partners -- rolling exit to test relationships and ownership 7
  • 8. HOW? APPLIED 8 Why:  Farmer  performance  is  due  to  limited  and  ineffec0ve  rela0onships  on  the   output  and  input  sides  of  produc0on:   o  Project  assists  output  firms  to  provide  market  requirements  maybe  through   improved  intermedia0on  services     o  Project  assists  input  firms  to  extend  distribu0on  networks  to  the  smallholder   market  with  a  focus  on  solu0ons  (i.e.,  informa0on  and  services)   How  -­‐-­‐  Intensity   •  Focus  leOng  value  chain  actors  take  the  lead     •  Project  takes  a  very  low  profile  by  spreading  its   par0cipa0on  between  output,  input  and  to  a   lesser  extent  smallholders   •  Resources  spread  between  actors  depending  on   the  responses/willingness  of  the  actors  to  take  on   certain  behaviors  and  drive  firm  and  industry   upgrading   Bad Better Even Better
  • 9. HOW? APPLIED Why:  Farmer  performance  is  due  to  limited  and  ineffec0ve  rela0onships  on  the   output  and  input  sides  of  produc0on:   o  Project  assists  output  firms  to  provide  market  requirements  maybe  through   improved  intermedia0on  services     o  Project  assists  input  firms  to  extend  distribu0on  networks  to  the  smallholder   market  with  a  focus  on  solu0ons  (i.e.,  informa0on  and  services)   How  -­‐-­‐  Intensity   Project  takes  a  very  high  profile  with   the  smallholder  and  targets  all   resources  on  direct  services  to  the   smallholder     Bad Better Even Better 9
  • 10. HOW? APPLIED 10 Why:  Farmer  performance  is  due  to  limited  and  ineffec0ve  rela0onships  on  the   output  and  input  sides  of  produc0on:   o  Project  assists  output  firms  to  provide  market  requirements  maybe  through   improved  intermedia0on  services     o  Project  assists  input  firms  to  extend  distribu0on  networks  to  the  smallholder   market  with  a  focus  on  solu0ons  (i.e.,  informa0on  and  services)   How  -­‐-­‐  Intensity   Project  takes  a  lower  profile  with   smallholders  and  output  firms,  but   will  target  resources  on  smallholder   training  and  inputs     Bad Better Even Better
  • 11. HOW? APPLIED 11 Why:  Farmer  performance  is  due  to  limited  and  ineffec0ve  rela0onships  on  the   output  and  input  sides  of  produc0on:   o  Project  assists  output  firms  to  provide  market  requirements  maybe  through   improved  intermedia0on  services     o  Project  assists  input  firms  to  extend  distribu0on  networks  to  the  smallholder   market  with  a  focus  on  solu0ons  (i.e.,  informa0on  and  services)   How  -­‐-­‐  Rela4onships   §  Project  facilitates  output  rela0onships  by   fostering  effec0ve  conduct  (transparent  and   longer  term)  of  those  rela0onships     §  Project  fosters  a  business  ra0onale  and   improved  capacity  within  output  firms  to   maintain  and  scale  up  those  rela0onships     §  Project  nego0ates,  some0mes  conducts   transac0ons  with  input,  and  delivers  products   to  smallholders   Bad Better Even Better
  • 12. HOW?  APPLIED   Why:  Farmer  performance  is  due  to  limited  and  ineffec0ve  rela0onships  on  the   output  and  input  sides  of  produc0on:   o  Project  assists  output  firms  to  provide  market  requirements  maybe  through   improved  intermedia0on  services     o  Project  assists  input  firms  to  extend  distribu0on  networks  to  the  smallholder   market  with  a  focus  on  solu0ons  (i.e.,  informa0on  and  services)   How  -­‐-­‐  Rela4onships   §  Project  creates  strong  and   dependent  rela0onships  with   smallholders  to  protect  them   §  Project  nego0ates  and  conducts   transac0ons  on  behalf  of  farmers   with  output  and  input  actors   Bad Better Even Better 12
  • 13. HOW?  APPLIED   13 Why:  Farmer  performance  is  due  to  limited  and  ineffec0ve  rela0onships  on  the   output  and  input  sides  of  produc0on:   o  Project  assists  output  firms  to  provide  market  requirements  maybe  through   improved  intermedia0on  services     o  Project  assists  input  firms  to  extend  distribu0on  networks  to  the  smallholder   market  with  a  focus  on  solu0ons  (i.e.,  informa0on  and  services)   How  -­‐-­‐  Rela4onships   §  Project  Facilitates  output  and  input   rela0onships  by  fostering  effec0ve  conduct   of  those  rela0onships.   §  Project  fosters  a  business  ra0onale  and   improved  capacity  in  output  and  input  firms   to  maintain  and  scale  up  those  rela0onships   §  Scans  for  opportuni0es  to  include  other   support  market  actors   Bad Better Even Better
  • 14. HOW? APPLIED Why:  Farmer  performance  is  due  to  limited  and  ineffec0ve  rela0onships  on  the   output  and  input  sides  of  produc0on:   o  Project  assists  output  firms  to  provide  market  requirements  maybe  through   improved  intermedia0on  services     o  Project  assists  input  firms  to  extend  distribu0on  networks  to  the  smallholder   market  with  a  focus  on  solu0ons  (i.e.,  informa0on  and  services)   How  -­‐-­‐  Ownership   §  Project  responsible  for  output   and  input  roles  limi0ng  the  need   for  smallholders  or  other  actors   to  change  or  own  the  process  of   behavior  change     Bad Better Even Better 14
  • 15. HOW? APPLIED 15 Why:  Farmer  performance  is  due  to  limited  and  ineffec0ve  rela0onships  on  the   output  and  input  sides  of  produc0on:   o  Project  assists  output  firms  to  provide  market  requirements  maybe  through   improved  intermedia0on  services     o  Project  assists  input  firms  to  extend  distribu0on  networks  to  the  smallholder   market  with  a  focus  on  solu0ons  (i.e.,  informa0on  and  services)   How  -­‐-­‐  Ownership   §  Project  facilitates  output  firms  to  own  the   behavior  changes  needed  to  develop   effec0ve  rela0onships  with  smallholders,     §  Project  limits  role/interest  of  input  firm  by   providing  direct  training  and  subsidies  on   inputs.     Bad Better Even Better
  • 16. HOW? APPLIED 16 Why:  Farmer  performance  is  due  to  limited  and  ineffec0ve  rela0onships  on  the  output   and  input  sides  of  produc0on:   o  Project  assists  output  firms  to  provide  market  requirements  maybe  through   improved  intermedia0on  services     o  Project  assists  input  firms  to  extend  distribu0on  networks  to  the  smallholder   market  with  a  focus  on  solu0ons  (i.e.,  informa0on  and  services)   How  -­‐-­‐  Ownership   §  Project  facilitates  using  tools  to  get  all  actors  to   take  on  key  behaviors  in  order  to  access   project  support.       §  Project  puts  condi0ons  on  support  dependent   on  buy-­‐in  and  reac0on  to  ini0al  project   interven0ons.       §  Project  knowledge  management  efforts  track   closely  ownership  and  changing  behavior  to   determine  if  changes  are  needed  including   exi0ng   Bad Better Even Better
  • 17. Facilita4on  Concepts   Fostering Relationships and Ownership: o Buying Down Risks §  Using project resources to reduce the risk of local actors to engage in transactions/shifts in business tactics that will lead to longer term commercial relationships and drive upgrading o Self Selection §  Requires value chain actors to perform and action in order to access project resource – the action has to lead to ownership of a behaviour change process 17
  • 18. Fostering  Rela4onships   Buying Down Risk: o Foster innovation in marketing and business tactics o Maintain local relationship focus o Embed subsidy to mimic real life transactions o Clarify exit in time and resources 18
  • 19. Fostering  Rela4onships   Buying Down Risks – How: o  Promotional events (i.e., discounts, Cost  share  training  and   opera0onal  costs  for   new  smallholder   manger  posi0on   transports, demos, etc.) o  Internal firm upgrading/expansion (i.e., management training, staff Cost  share  training  of   skills/internships, etc) mid-­‐level  managers  with   Cost  share  with  buyer   large  promo0onal  event   to  explain/sell  market   opportunity  to  farmers   private  input  firms  to   promote  and  manage   rural  services  delivery   Internal  firm   upgrading  and   expansion   Promo0onal   events   Cost  share  promo0onal   discounts  and  demos  with   input  firm  to  get  farmers  to   tests  products  and  services   19
  • 20. Fostering  Rela4onships   Buying Down Risks – How: o  Service delivery (i.e., certification skills, equipment, research, etc.) Assist  and  cost  share   with  input  firm  and   spraying  service   providers  a   cer0fica0on  process  for   individual  sprayers   Cost  share  research  with   ICT  firms/banks  mobile   banking  plaTorms  for   transfer  and  payment   services   Service  delivery   Cost  share  equipment  and   training  with  Rice  firm  for   service  providers  signing   exclusive  deals  for   discounts  to  their  suppliers   20
  • 21. Fostering  Ownership   Self Selection: o Ensuring ownership o Setting hurdle to entrance o Changing hurdle height as program evolves o Using hurdles to manage rolling exits 21
  • 22. Fostering  Ownership   Self  Selec4on  examples:       Rice  firms  has  to  has  agree  to  SH   management  and  iden0fy   specific  managers  to  ini0ate  the   program   Then   Project  assists  training  of  mid-­‐ level  managers  on  new  supply   chain  management  skills   Rice  firms  must  conduct   internal  systems  review  to   iden0fy  inefficiencies  and   informa0on  gaps   Then   Project  cost  shares   upgrading  of  system  to   support  new  SH   management  strategy   22
  • 23. FACILITATION   •  Intervening for relationships and ownership is more art more than a science §  Goal is to do just enough risk reduction to foster interaction and trust investments §  Value is really only determined when someone demonstrates via investment/ behavior change §  Rolling exit and wait and see are important ways to use self selection 23
  • 24.   Incen0ves     Buying  Down   Risk   Demonstra0on   Effect   Upgrading   Crowding  In   Exit  Strategy  
  • 25.                   Incen0ves     •  Understanding  and   building  on  the  drivers   (interests  and  mo0va0ons)   of  the  actors  to  take  on  a   new  behaviour  (take  on  or   par0cipate  in  a  new   ac0vity)     •  May  be  social,  personal,   financial,  etc.             •  Agrovet  and  3rd-­‐party  support   services  want  to  grow  their   businesses  and  make  higher   profits,  by:       •  developing  be]er  rela0onships   with  customers  (for  repeat  sales   from  farmers)   •  reaching  new  customers  (by   selling  to  new  farmers  in  rural   areas)   •  making  more  sales  (by  making  it   easier  to  order,  access  and  pay   for  their  products)  
  • 26.                   Buy-­‐down  risk   •  To  demonstrate  the  benefits  of   new  market  behaviours,  a   project  might  decide  to   decrease  (“buy  down”)  the  risk   of  a  market  actor  trying  out  the   new  behaviour  -­‐  using  strategic   “smart”  subsidies.   •  It  may  seem  too  risky  for  the   market  actor  to  bear  the  cost   and  0me  of  taking  on  the   behaviour/ac0vity  on  their  own   for  the  first  0me             •  A  cost  share  was  used  by  the   project  to  share  costs  for  the   open-­‐air  market  day   promo0onal  stalls  as  a   demonstra0on  to  agrovet  that   this  would  indeed  bring  in   more  customers  and  sales.       •  The  project  covered  a  rapidly   decreasing  %  of  the  cost  of   transport  for  the  first  10  open-­‐ air  market  days    
  • 27.   Demonstra0on  Effect   • Effects  on  the  behaviour  of   individuals  or  firms  caused  by   observa0on  of  the  ac0ons  of   others  and  their  consequences   • Uses  early  behaviour  change   adopters  as  examples  /  models   • Goal:  deepen  ownership  of   behaviour  changes  in  the  value   chain  actors,  and  broaden  the   change  throughout  the  value   chain  so  that  it  becomes  a   “norm”           •  Other  input  suppliers   (agrovets)  see  how  successful   the  agent  network  and  rural   market  day  promo0ons  are,   and  start  seOng  up  services  to   reach  poorer  farmers  in  rural   areas.    
  • 28.                   Upgrading   Inves0ng  0me,  money  or   other  resources  into   improving  the  enterprise     -­‐  -­‐  -­‐  Process  upgrading  (new   produc0on  techniques  or   improved  technology)   Product  upgrading  (improving   the  product  or  other  product   lines)   Func0onal  upgrading   (improving  skills)               •  Invested  in  new  technology  to   improve  his  business  (M-­‐PESA   payments,  cell  phone   customer  research  tool)   •  Invested  in  bringing  in  new   partners  to  be  able  to  offer  a   more  sophis0cated  range  of   products  and  services   •  Invested  in  improving  skills   and  buying  new  equipment  to   run  local  promo0onal  events  
  • 29.                     Crowding-­‐in   •  Interven0ons  catalyze  or   bring  in  other  players  and   func0ons  into  the  market   system  so  that  it  works   be]er  for  the  poor.     Can  result  in:   •  Expanded  breadth  (more   transac0ons  in  the  market)     •  Expanded  depth  (suppor0ng   func0ons)     •  Expanded  reach  (new  areas  or   markets)             •  Increasing  number  of  agrovets   may  see  the  success  of  a   business  strategy  to  target   rural  farmers,  and  start   copying  or  adap0ng  the   ac0vi0es  of  the  agrovet     •  Increasing  number  of  support   service  providers  are  seeing   the  benefit  of  partnering  with   agrovets  to  target  poorer   producers  (spraying,  soil   tes0ng,  …)  
  • 30.                   Exit  Strategy   • Stopping  investments  in  a   certain  ac0vity  once  a  certain   level  of  uptake  or  behaviour   change  has  been  reached.   • “Rolling  exit  strategies”  stop   cost-­‐sharing,  using  a  wait-­‐and-­‐ see  approach,  to  see  if  a  market   actor  self  selects  to  take  on  an   ac0vity  by  themselves,  showing   that  they  have  the  ownership   and  capacity  to  con0nue   without  the  project’s  support.           • The  project  stopped  cost-­‐ sharing  open-­‐air  market  day   stalls  as  the  agrovet  started   seeing  value  and  demonstrated   the  ownership,  capacity  and   means  to  take  on  the  ac0vity   • The  project  planted  the  idea  of   an  agent  network,  but  waited   to  see  if  the  agrovet  took  the   ini0al  steps  to  put  this  in  place   before  inves0ng  more  0me  and   money  into  strengthening  the   network.  
  • 31.   Incen0ves     Buying  Down   Risk   Demonstra0on   Effect   Upgrading   Crowding  In   Exit  Strategy