This document outlines the key concepts of the Market Systems Development (M4P) approach. It discusses how markets often fail to serve the poor due to limited access to information, weak institutions, and high transaction costs. The M4P approach aims to facilitate sustainable change in the market system through a light-touch and flexible role. Interventions identify leverage points and partners to stimulate systemic changes, such as encouraging new relationships between private sector actors, that ultimately benefit large numbers of poor people through improved access to markets.

1. Market Systems Development (M4P) – A Conceptual Outline
Martin Dietz
Regional Workshop
Bentre, Vietnam
23.9.2013

2. Market Systems and the Poor
Smallholders often know little about
market demands and opportunities
They often live in inaccessible
places
No access to services – technical,
financial
Traders / processors find it too
expensive and time consuming to
work with many small suppliers
Institutions are weak not providing
or enforcing rules and regulations
for market actors, the environment
is not condusive for doing business
Markets are often not working for the poor

3. Market Systems and the Poor
Due to
Limited or no access to information
Weak institutional environment
High transaction cost
Monopoly or non-competitive markets
Market relations do not establish themselves
due to factors listed above
Market failures

4. Market Systems: Players and Functions
Infra-
structure
Advisory
services
Market
information Financial
services
Skills and
capacities
Regulations
Standards Laws
Informal
rules and
norms
Supporting Functions
Rules
Core Market Function: Value Chain
Sourcing Production Marketing

5. M4P – Key Features of Interventions
1. Context-specific: understanding where systems are failing to serve the needs
of the poor and acting to correct those failings; understand causes rather than
only symptoms
2. Facilitative role: Sustainable change: catalytic role of development agent to
stimulate systemic change. Facilitate creation of incentives and capacities
3. Large-scale impact: explicitly aims to reach large numbers of poor by
harnessing the dynamism of the market system- seeks leverage points, co-
investment and ‘crowding’ in of market players
4. Learning & Adaptability: systems are dynamic: interventions need to be
Iterative process of change needs built-in learning to support flexible decision-
making and seize windows of opportunity.

6. Steps and Elements of the M4P Approach
• Market Analysis
• Developing a strategic framework – results chains
• Develop a vision for a sustainable market system
• Take a facilitative role as development organisation
• Identify leverage points – interventions to obtain scale
and impact

7. Steps and Elements of the M4P Approach
Market Analysis
• Developing a strategic framework – results chains
• Develop a vision for a sustainable market system
• Take a facilitative role as development organisation
• Identify leverage points – interventions to obtain scale
and impact

8. Steps and Elements of the M4P Approach
Gain a sound understanding of the market
system and the underlying reasons why poor
people often fail in markets.
The analysis includes
The relevance of the sub-sector to poor
people
Mapping of main actors in the sub-sector
Identification of constraints and opportunities
for poor producers
A sound analysis of why markets may fail the
poor
Market Analysis
Level 1:
The poor and their context
Level 2:
Specific market
system
Level 3:
Systemic
constraints

9. Level 1: Market system selection
Level 1:
The poor and their context
Level 2:
Specific market system
Level 3:
Systemic
constraints
Intervention focus
Relevance to the poor?
High numbers of
disadvantaged groups (as
producers, employees,
consumers)
Pro-.poor access or
growth potential?
M4P Intervention potential
Feasibility of stimulating market
systemic change
Criteria
Size
Relevance
Prospects
Considerations
agency priorities
agency capacity
feasibility

10. Level 2: Assessing specific market systems
Level 1:
The poor and their context
Level 2:
Specific market
system
Level 3:
Systemic
constraints
Intervention focus

11. Level 2: Assessing specific market systems
How does the market system work?
What are its key functions,
Who are the key players
What is the overall effectiveness of the market
Competitiveness
Productivity
How does the market fail the poor?
Where are potential opportunities for the poor?
Dynamics of the system
What changes have been taking place?
What are the drivers of change?
What are the opportunities for the poor in the market system?

12. Level 3: Identify specific systemic constraints
Identify the specific causes of underperformance
What are the reasons why market systems
underperform? Assess interconnected markets
How can these impediments to performance be
overcome?
Set your focus on:
Incentives of players
Capacity of players
Relationships between players
Level 1:
The poor and their context
Level 2:
Specific market system
Level 3:
Systemic
constraints
Intervention focus

13. Four steps to designing interventions
1. Understand
Assessment of market systems
Opportunities, constraints
Why does it not work?
Who could trigger change, and how?

14. Four steps to designing interventions
2. Identify Collaboration Partners
Who in the market system is most able, most
interested?
Who may have most incentives?
Why are they not making use of the
opportunity?
What are the impediments?
Solution to the cause of constraint:
What can be the business model?
What should collaborating partners do to make it work?
What should be our role to make it work?

15. Four steps to designing interventions
Private interests Public interests
…is based on
common interests

16. Four steps to designing interventions
3. Deal Making
Deal = agreement between facilitator and system actor
Defines activities that enables your partner to trigger changes in
the (support) market
Specify:
• Why you do this together
• How you do this together
• What your partner does
• What you do as facilitator

17. Four steps to designing interventions
4. Support / Implement
Curriculum development Advise for curriculum
development
Hires new staff
Trainers train extension staff
Provides trainers
Assists in training
Pays 60% of new staff for first 3
months, then 30% for 9
months, then zero
Facilitating training of trainers
Market Actor M4P Project

18. Steps and Elements of the M4P Approach
• Market Analysis
Developing a strategic framework – results
chains
• Develop a vision for a sustainable market system
• Take a facilitative role as development organisation
• Identify leverage points – interventions to obtain scale
and impact

19. Developing a Strategic Framework
Poverty Reduction
Improved growth
and access
Market system
change
Systemic interventions

20. Developing a Strategic Framework
Poverty Reduction
Improved growth
and access
Market system
change
Systemic intervention
The poor will benefit
Our interventions contribute to a lasting change in
the market system so that poor people can increase
their benefits in markets
Market system change so that poor people can make
use of opportunities?
Poor people make use of market opportunities?

21. Steps and Elements of the M4P Approach
• Market Analysis
• Developing a strategic framework – results chains
Develop a vision for a sustainable market system
• Take a facilitative role as development organisation
• Identify leverage points – interventions to obtain scale
and impact

22. Vision for a Sustainable Market System
Infra-
structure
Research &
development
Information
Financial
services
Skills and
capacities
Regulations
Standards Laws
Informal
rules and
norms
Supporting Functions
Rules
Supply
Setting and enforcing rules
Demand
Core
Function
Informing and communicating
Govern-
ment
Informal
networks
Not-for-profit
sector
Private Sector
Membership
organisations
Representative
bodies
Players
Media
Functions?
Players?
Who does?
Who pays?
Key questions:
1
2
3
4
Capacitiesandincentives
Why
(incentive)?
5

23. Vision for a Sustainable Market System
Functions
Players
Who does? Who pays?
CORE
RULES
SUPPORTING FUNCTIONS
Functions
Players
Who will do? Who will pay?
CORE
RULES
SUPPORTING FUNCTIONS
CURRENT SITUATION FUTURE SITUATION
Strategies how
to get there

24. Steps and Elements of the M4P Approach
• Market Analysis
• Developing a strategic framework – results chains
• Develop a vision for a sustainable market system
Take a facilitative role as development
organisation
• Identify leverage points – interventions to obtain scale
and impact

25. Facilitating Change
The essence of facilitating change is stimulating market players to
do things that they are currently not doing (or not doing well)
Stimulate changes in the market system
Seed companies train local service providers
Market-based, local service providers train
poor producers
Local service providers are paid by market actors
Poverty Reduction
Improved growth
and access
Market system
change
Systemic intervention

26. Facilitating Change
Our interventions aim at triggering changes in the
market system
Encourage seed companies to provide broad technical
training on vegetable cultivation to local service providers
Support companies in developing a curriculum (example)
Project may facilitate training of trainers
Work with innovators and early adopters
Poverty Reduction
Improved growth
and access
Market system
change
Systemic intervention

27. Features of Good Facilitation
Catalysing
• Initiating, motivating, linking
Light-
touch
• Limited levels of support to
players
• Indirect
flexible
• Responsive and
opportunistic…
• …but guided by strategy
…facilitative
interventions
have to be

28. Facilitating Change
Start small, work with few actors
Monitor closely (against results chain)
Be flexible, adapt, modify
Test the business model: do market systems changes happen?
When successful:
Make business model known (knowledge management &
learning)
Support expansion (scaling up)
Facilitate crowding in

29. Leveraging for scale
500,000
farmers
20,000
farmers
2,000
farmers
Prospects for: leverage, scale and sustainability
Market 1
Vegetables
Market 2
Retailer information
Market 3
Retailer training
Source:TheSpringfieldCentre

30. Value Chain / Market Systems
Development
Infra-
structure
Advisory
services
Market
information Financial
services
Skills and
capacities
Regulations
Standards Laws
Informal
rules and
norms
Supporting Functions
Rules
Core Market Function: Value Chain
Sourcing Production Marketing

31. Value Chain / Market Systems
Development
Infra-
structure
Advisory
services
Market
information Financial
services
Skills and
capacities
Regulations
Standards Laws
Informal
rules and
norms
Supporting Functions
Rules
Value chain approach Market systems approach
Focus on the value chain Focus on the wider market
system and interconnected
markets
Focus on sub-sector rather
individual value chains
No explicit facilitative
approach; development
organisations may take
market actor roles
Explicit facilitative approach
Scale often limited to
specific value chains
Aims for large scale through
leveraging with selected
partners
No explicit focus on
ensuring sustainability
Clear focus on sustainability

32. Take away message
Context is the starting point
Focus on causes not symptoms
Must consider power dynamics, governance systems
Project rationale – results chains
Sustainability = facilitative role of development actor
Aim for inclusiveness – poor men and women will benefit
Flexibility, adaptability is key