This is 1 of 4 presentations used in a workshop in Zambia for market systems development practitioners.

1. Market
System
Principles

2. Market
System
Principles
• The
interac4on
of
independent
market
actors
to
achieve
a
specific
purpose.
– Short
vs.
long
term
– Exclusive
vs.
inclusive
– Zero
sum
vs.
expanding
the
pie
• System
are
complex
– Influenced
by
other
poli4cal
&
social
systems
– Individual
incen4ves
differ
and
this
leads
to…
– Different
interpreta4ons
on
how
to
behave
• Systems
tend
to
form
paHerns
of
behavior
– Re-­‐align
all
incen4ves
around
a
common
purpose
of
inclusive
growth
– Can
begin
to
predict
and
shape
overall
system
behavior
rela4ve
to
this
purpose

3. Ra4onale
for
Market
Systems
Approach
Objec&ve:
The
interac&ons
of
inter-­‐dependent
market
actors
to
achieve
the
purpose
of
inclusive
growth
Rela4onships
Performance
driven
and
more
wide
ranging
between
market
actors
as
characterized
by
trust.
Rules
(formal
Creates
condi4ons
for
driving
on-­‐going
investments
and
informal)
in
improved
performance.
Incen4ves
Alignment
exists
between
the
enterprise,
the
market
system
and
the
individual
Capacity
The
know-­‐how
and
know-­‐who
needed
to
seek
solu4ons
for
growth
in
a
constantly
changing
market
context.

4. Workshop
Objec4ve
To
introduce
par4cipants
to
key
conceptual
frameworks
and
opera4onal
tools
-­‐-­‐
in
use
by
M4P
prac44oners
-­‐-­‐
for
designing,
managing
and
monitoring
program/project
investments
using
the
market
systems
approach
(aka
M4P).

5. Workshop
Agenda
Day
Morning
9:00
–
13:00
(30
m
Break)
Lunch
13:00
-­‐14:00
A>ernoon
13:00
–
17:30
(30
m
Break)
1
IntroducCon
to
the
Workshop
Market
Systems
Understanding
• Structure
&
FuncCon
• System
Dynamics
EvoluCon
of
M4P
Approach
2
Market
Systems
Approach
• Strategic
Framework
• Planning
for
Sustainability
FacilitaCon
Strategy
• Leverage
FacilitaCon
TacCcs
• Partner
SelecCon
3
FacilitaCon
TacCcs
• Pathway
to
Crowding-­‐In
• Framing
Offers
(1)
FacilitaCon
TacCcs
• Behavior
Change
Principles/TacCcs
• Offer
(2)
Results
Measurement
Basics
4
Knowledge
Management
• Momentum
• Data
sources/uses
• Results
Chains
FacilitaCon
Management
• Implementers
• Donors
• Stakeholders
Summary/Review
EvaluaCon

6.
Understanding
Market
Systems
Market
system
defined
Market
System
Picture
(Sta8c)
Inter-­‐connected
markets
Lessons
from
Prac8ce

7. Markets:
from
theory
to
reality
• Markets
are
a
medium
for
exchange
“Set
of
arrangements
by
which
buyers
and
sellers
are
in
contact
to
exchange
goods
or
services”
• In
economic
theory,
markets
work
efficiently
when
key
assump4ons
hold
Ra8onality,
informa8on,
incen8ves,
compe88on,
externali8es
etc
• When
assump4ons
don’t
hold
–
‘market
failure’
results
In
real
world,
effec8ve
markets
find
ways
of
dealing
with
failures
–
market
systems
• In
development,
we
can’t
simply
assume
problems
away
We
need
a
more
prac8cal,
view
of
how
market
systems
work
(or
don’t)
• Key
element
is
transac&on
What
brings
supply
and
demand
together?

8. From
transac4ons
to
a
market
system
SUPPORTING
FUNCTIONS
Informa8on
IncenCve
Capacity
RelaConships
Wholesale
Input
Demand Produc4on
CORE
Processing
Supply
Standards
Supply
Laws
RULES
Springfield Centre | Making markets work
Retailers

9. The
market
system…mul4ple
func4ons
• The
core
The
point
of
transac8on:
relates
to
delivery
of
some
form
of
good,
service
or
func8on
-­‐
the
inter-­‐face
between
consumer
and
supplier
• The
rules
The
rules
of
the
game:
govern
and
shape
incen8ves,
behaviour,
prac8ce
of
both
the
core
and
suppor8ng
func8ons
• The
suppor&ng
func&ons
Enable
the
core
delivery
to
take
place,
act
as
transmission
mechanisms
for
rules
to
be
effec8ve
• …
And
of
course,
different
private
and
public
players
performing/financing
these
different
roles

10. ...
and
mul4ple
players
SUPPORTING
FUNCTIONS!
Infrastructure!
Private
sector
Government
Information!
Related
services!
CORE!
Membership
organisa8ons
Inputs
Wholesal
Demand Processing
Supply e
ProducCon
Representa8ve
bodies
Informal
rules &
norms!
Standards!
Informal
networks
Laws!
Regulations!
Civil
society
Retail
RULES!

11. …market
systems
are
inter-­‐connected
On
farm
trials
Seeds
Community
Agents
Supply
Chain
Mgmt
Inputs
Appropriate
Research!
Rice
Timely access to
products & services!

12. Group
Task:
Market
System
Matrix
Select
a
sector
in
which
Musika
works.
Brainstorm
answers
to
these
ques8ons:
1. What
are
core
func4ons
–
raw
materials
to
finished
product/
service
–
and
who
performs
them
in
markets
in
which
you
are
working:
2. What
key
support
func4ons
are
required
for
market
performance?
3. What
rules
–
formal
and
informal
–influence
the
market
performance?
4. What
market
actors
-­‐-­‐
private,
public,
NGO,
member-­‐based
associa4ons
–
perform
support
func4ons
and
rules?
Prepare
flipcharts
and
be
ready
to
present
in
plenary:
1. Draw
the
links
between
the
core
func4ons
(value
chain)
2. Draw
a
donut
making
sure
to
separate
func4ons
(in
the
donut)
with
players
(outside
the
donut)
3. Circle
the
market
func4ons
where
you
are
working

13. History
of
TNS
in
Kenya
Dairy
Development
Feed,
Breed,
Vet
Firms
Rural
Banks
Packaging
Companies
Professional
Mgmt
Services
Kenya
Dairy
Board
Livestock
Gene4c
Society
Aggrega4on:
Dairy
Hubs
for
chilling/services
SUPPORTING
FUNCTIONS!
Infrastructure!
Related
services!
Information!
CORE!
Farmer
Capacity:
skills,
informa4on,
linkages
Inputs
Wholesal
ProducCon
Demand Processing
Supply e
Informal
rules &
norms!
Standards!
Livestock
Gene4c
Society
Industry
Associa4ons
–
Milk
Traders
Retail
Laws!
Regulations!
RULES!
Kenya
Dairy
Board

14. History
TNS
Dairy
Cer&fied
Commercial
Hay
Producer
Aggrega&on
thru
Dairy
Hubs
Feed
Dairy
Farming
as
a
Business
Markets
Limited Access
to Quality Hay!
ProducCon
Lack of Access to
Better Markets!
Lack of technical/
business skills of farmers!

15. Understanding
Market
Systems
Market
System
Dynamics
PaHerns
of
Behavior

16. Market
System
Dynamics
How do people relate
in market systems?
• Compete
SUPPORTING
FUNCTIONS!
Infrastructure!
Related
services!
Information!
• Cooperate
Demand
Supply
Informal
rules &
norms!
Standards!
Laws!
Regulations!
RULES!

17. Market
System
Dynamics
What defines effective
market system performance?
• On-going
upgrading that
meets/exceeds
industry
standards
Inclusive
Growth
SUPPORTING
FUNCTIONS!
Infrastructure!
Information!
Demand
• More inclusive
participation
and benefit
flows
Limited
Growth with
no Poverty
Reduction
Related
services!
Supply
Informal
rules &
norms!
Standards!
Regulations!
RULES!
Laws!

18. Group
Task
• Choose
one
person
in
your
group
to
read
out
each
ques8on.
Once
your
group
has
discussed
the
ques8on,
the
person
then
reads
out
the
next
ques8on.
• There
is
no
need
to
read
out
all
the
ques8ons
first.
Rather
have
a
discussion
before
proceeding
to
the
next
ques8on.

19. Drivers
of
System
Change:
Compe44on
and
Coopera4on
What
are
some
paHerns
of
behavior
in
market
systems?
Degree of Market System Effectiveness
Best
Norm:
Constant
upgrading
Innova4on/Differen4a4on
Better
HIGH
Joint
Marke4ng
Zero-­‐sum
tac4cs
Competition
Better
Embedded
Services
Poli4cal
Favori4sm
Collusion
An4-­‐compete
rules
HIGH
Specialised
Services
Joint
response
to
opps.
&
threats
Compe44ve
response
internalised
Transparent
rules
Bad
Norm:
Constant
upgrading
Best
LOW
Cooperation
Bad
HIGH

20. Have
you
heard?
(PLENARY
+
PAIRS
EXERCISE)
TASKS:
• For
each
statement
answer
these
ques4ons:
– Who
is
the
rela4onship
with?
– How
would
you
describe
the
nature
of
the
rela4onship?
– What
does
the
statement
imply
about
the
nature
and
degree
of
compe44on
and/or
coopera4on?
– Are
there
any
rules
that
may
have
influenced
the
statement?
– What
would
you
like
to
hear
more
olen
in
the
future?
20

21. Farmer
Quotes
(plenary)
1. “When
my
neighbor
does
well
it
is
a
reflec8on
on
his
selfishness
and
he
should
act
more
like
the
rest
of
the
community”
2. “We
have
tried
to
pool
our
money
to
buy
larger
amounts
of
inputs
to
get
a
beUer
deal,
but
we
couldn’t
get
it
to
work
as
many
of
us
could
not
hold
cash
long
enough
to
get
organized”
21

22. Processor
Quotes
1.
“I
want
to
source
more
paddy
from
small
farmers,
but
I
have
had
trouble
with
a
few
traders
thinking
short-­‐term
and
chea8ng
me
so
I
am
not
sure
how
to
start”
2.
“I
need
to
generate
loyalty
with
my
farmer
suppliers
and
limit
side
selling
buying,
so
embedding
services
and
providing
performance
incen8ves
should
help
keep
my
mill
u8lisa8on
rates
high”
22

23. Input
Provider
Quotes
1. “I
know
my
future
depends
on
smallholders,
but
I
don’t
know
how
to
get
to
my
future
and
it
seems
too
far
away”
2. “I
heard
another
input
firm
on
the
radio,
so
I
called
my
cousin
in
the
tax
authority
to
check
on
how
they
can
afford
adver8sing”
23

24. Drivers
for
System
Player
Change
Comfort
Zone:
Higher
Potential
for
Adoption of
New Ideas
-­‐
Actor’s
history/context
-­‐
Ra4onal
self
interest
-­‐
Readiness
to
try
a
new
way
IncenCves:
-­‐
Economic
(yields,
income)
-­‐
Social
(reputa4on,
pres4ge)
Incremental
Risk:
-­‐
Quick
wins
from
taking
a
risk
-­‐
Track
record
of
embracing
risk
-­‐
Managing
risk
of
upgrading

25. Pace
of
System
Player
Change
Speed
or
pace
by
which
system
players
adopt
new
ideas
Innovators
Early
Adopters
Early
Majority
Late
Majority
FAST
Laggards
SLOW
Innovators: High risk fits easily in comfort zone
Early Adopters: Comfortable taking risk on new idea provided adoption
preserves their status as “opinion leader” in community.
Early Majority: Waits for others to adopt/benefit to be in comfort
zone
Late Majority: Sceptics w/discomfort to adopt unless majority have done so
Laggards: Tradition bound w/ high degree of discomfort to adopt
new ideas
25

26. Origins/Evolution of the Approach
• Recent
“surge”
in
interest,
but
based
on
collec4ve
learning
from
30+
years
• Origins
linked
to
academic
enquiry:
•
•
•
•
Ins4tu4onal
and
behavioural
economics
Systems
thinking
Compe44veness
Dependency
theory

27. Evolution of aster
4tle
Click
to
edit
Mthe Approachstyle
1980s
Focus
on
alterna4ve
technologies
and
microfinance
for
rural
poor.
1990s
Limita4ons
of
microfinance
alone
drives
emergence
of
subsector
analysis,
market
linkages,
non-­‐
financial
support
for
SMEs
(BDS)
and
secondary
issues.
2000s
2010/Going
forward
Sustainability
concerns
lead
to
market
development
or
market
systems
thinking.
Increasing
emphasis
on
defining
sustainability
more
dynamically
in
terms
of
resiliency,
adapta4on
and
solu4on
thinking.
Cross
-­‐sectoral
learning
from
applica4on
in
other
sectors.

28. Application of the Approach
• Predominantly
used
in
agricultural
market
systems
• However,
increasing
applied
to
other
sectors:
• Public-­‐private
dialogue
and
business
advocacy
(ENABLE
Nigeria)
• Financial
services
(FSD
Kenya)
• Infrastructure
(Kenya
MAP
-­‐
water)
• Land
(GEMS3)
• Health
(hfp://www.futurehealthsystems.org)
• EducaCon
(Liberia
ACE)
• Gender
(MEDA)

29. Four Underlying Principles
Click
to
edit
Master
4tle
style
1
Understanding
the
system
Understanding
how
and
why
markets
func4on
to
the
detriment
of
the
poor,
and
fostering
a
systemic
shil
to
affect
how
the
poor
par4cipate
in
and
benefit
from
market
systems
2
Pro-­‐poor
sustainable
change
Delivering
sustainable
outcomes
by
beHer
aligning
key
market
func4ons
and
players
with
the
incen4ves
and
capacity
to
work
more
effec4vely
3
Large-­‐scale
impact
Targe4ng
interven4ons
that
foster
systemic
change,
impac4ng
large
numbers
of
poor
people
4
FacilitaCve
approach
Determining
a
cataly4c
purpose
for
the
development
agent
that
s4mulates,
but
does
not
displace,
market
func4ons
or
players

30. Why are these Principles Important?
Phase
2
Phase
3
Phase
4
High-­‐level
Impact
Phase
1
Time
Project
LifeCme
Market
systems
project
impact
profile
Direct
interven4on
impact
profile

31. Example:
Uganda
rural
SMEs
constrained
by
lack
of
informa4on
Project A: 1999--; US$2.5m/3
yrs; est. av. $0.5m/yr
Increase
info
for
rural
MSEs
“Info
is
a
long
term
strategic
public
good”
Peak of 7-8m listeners
Goal
Outreach
Sustainability
Outreach
Initially 10 stations but
dissemination cut as funding cut
to $50k/yr. Other activities
remain donor funded
2 projects
Project B: 1999-2007; ~US
$1.2m
Establish sustainable, effective
info for rural MSEs via the mass
media
7m regular listeners
25 stations with independent
MSE programmes; emerging
new programmes & support
services: no donor funding
Project A
Project B
Time

32. What
explains
the
difference?
Provide information to MSEs
Rationale
Make commercial media work
better for MSEs in rural areas
Symptoms: what info do the Understanding Causes:
understand
structures,
prac4ces,
incen4ves
of
media
poor need?
system
–
why
not
pro-­‐poor?
Unclear:
“A
long
term
strategic
Explicit: commercial, based on
public
good”,
but
no
assessment
of
Sustainability local ownership & incentives,
govt
capacity
or
incen4ves
appropriate for local context
Direct involvement & finance:
• info collection
• analysis
• prog production
• purchase airtime
• coordinate
Action
Facilitate and catalyse:
• develop own understanding,
networks & credibility
• influence, demonstrate & link
• TA to stations & other players
• work through local actors
• no finance to radio stations