Market Systems Development (MSD) involves taking a facilitative approach. This requires the use of various market facilitation tactics, designed to influence the behaviour and relationships of market actors in ways that lead to lasting improvements.
These tactics aim to address systemic constraints, promote innovation and create a more resilient and inclusive market for all.
The art of market facilitation provides guidelines on some key practical questions facing facilitators, based on synthesised learnings from the FSD Network as captured in seven case studies written by the Springfield Centre.
Principles of facilitation
Before diving into specific tactics, it’s essential to understand the underlying principles that guide their effective application:
- Building relationships: strong relationships are essential for effective facilitation. This means building trust with market actors, understanding their needs and priorities and acting as a bridge between different players in the system.
- Catalysing change: facilitation aims to create incentives for market actors to adopt new behaviours or approaches. This can involve demonstrating the benefits of change, reducing the risks associated with innovation, or providing targeted support to overcome initial barriers.
- Flexibility and adaptability: facilitation requires a flexible and adaptive approach. Programme leads should be prepared to adjust their strategies based on ongoing learning and feedback.
Market systems facilitation, how good are you? explores six principles of facilitation, adapted from Engineers Without Borders. It walks you through each of them using two real-life programmes to examine how they applied them.
The ‘Have you tried everything else?’ test presents potential interventions on a spectrum based on the risk to partner ownership/sustainability, suggesting that 'light touch' activities be tried first before engaging in heavy partner support.
Common market facilitation tactics
The following lists some common intervention tactics used across MSD programmes.
1. Making a business case
Many market development programmes invest in conducting market research or feasibility studies as a means of building confidence and buy-in from market actors who need a minimum level of evidence before they try out a certain idea. Building an evidence-base involves researching a customer segment or new business idea and presenting the findings persuasively to potential partners.
While some of this market research may exist already - or there may be locally available market research firms that you can sub-contract - it is highly likely your own team will have to carry out the work since you are testing new products or customer segments. Examples of business cases could include:
- Accessing untapped employee talent
- Improving supply chain reliability
- Reaching new customers
- Opening new distribution channels
- Enhancing the brand and reputation of the business
- Furthering social impact
- Promoting environmental sustainability or inclusion within the business model
Where there are cultural barriers to change, such as entrenched gender roles limiting women’s participation in a market, iterative engagement may be needed to re-enforce key messages.
Making the business case: women’s economic empowerment in MSD offers guidance and real-world examples to help companies empower women working at every level of the economy.
The business case for disability inclusion in MSD presents information on the relevance of disability inclusion in private sector or market development.
2. Buying down risk
Cost-sharing is used by programmes to help buy-down the risk of a market actor trying a new innovation. This tactic is useful when a potential partner understands the benefits and risks of a new venture, and requires a small safety net to increase their confidence throughout implementation.
Cost-sharing can involve:
- Directly subsidising some of your partners’ costs or the innovation itself.
- Using subsidies on the customer side, such as vouchers or coupons, to increase demand for your partner’s product or service.
- Working with an “indirect” market service provider in subsidising their service to your partner.
- Using challenge funds or other competitive processes that guarantee awardees a subsidy in exchange for testing innovations. These should be employed carefully and with a sure understanding of the market failure that the challenge fund is addressing.
Cost-sharing can be risky as it may distort market behaviour without leading to behaviour change in the long term. The size of the cost-share should also be carefully calculated. It should not be so high that potential competitors never crowd-in on the innovation. If it is, the programme will have to find other ways to reduce the cost or other barriers to entry for the competition. Likewise, they should not be used to cover operational costs that involve no new risk for the business.
Good practice in cost-sharing:
- Avoid utilising standardised cost-sharing modalities – the cost-share agreement should always be based on the specific risks involved in the partnership.
- Understand or “right-size” your processes ahead of time to ensure that you can move as fast as the private sector does, or at least to allow you to set expectations.
- Ensure that whatever offer the programme is making, it’s not too good to turn down; you want the partner to be motivated by the change, not by the potential short-term gain from your offer.
- Avoid tackling a series of organisation-specific problems one by one, rather than addressing issues that cut across the sector
The art of the deal - using grants to catalyse market systems change shares some valuable lessons from SHARPE Ethiopia on using and negotiating grants to spark innovation and market system change in the private sector.
Facilitation tool: small business expansion sub-awards looks at a risk-sharing mechanism used by Mercy Corps in Ethiopia, the results achieved and lessons learned.
3. Technical capacity-building
Technical capacity-building is a common intervention tactic for market systems programmes. It can involve a range of approaches from:
- Bringing in a consultant, intern, specialist or mentor to provide targeted, short-term tailored support to a market actor with a capacity gap.
- Developing and running a training session on a particular knowledge gap.
- On-the-job coaching with your staff as facilitators.
It is important to remember that technical capacity should be treated as a support market in its own right. If a gap in capacity is an industry-wide problem, try to work with an existing service provider to either offer capacity-building services, or to develop what market actors need. This ensures the service can continue after the programme is over.
Making effective use of grants and technical assistance focuses on understanding how to use technical assistance and grants effectively within the financial sector, with the aim of facilitating inclusive and sustainable business practice change at scale.
4. Stakeholder coordination
A common tactic in many market development programmes is to coordinate stakeholders when there is poor communication between market actors resultingin constant market failure, or when the solution to a problem requires stakeholders to work together to come to a consensus on a proposal or policy.
Tactics to coordinate stakeholders can range from stakeholder consensus-building workshops, to formal mediation processes, to industry association conferences. However it is also important to recognise that workshops are not the only way of coordinating.. You can also meet individually with different market actors, or act as the coordination point for brokering new partnerships.
Stakeholder coordination as a tactic should be used carefully as it may not be the most effective use of resources if market actors have heavily entrenched disagreements. Sometimes, encouraging formal mediation may be a more appropriate tactic.
An assessment of overall effectiveness of agricultural multi-stakeholder initiatives assesses the current roles of multi-stakeholder initiatives (MSIs) and explores how they can improve the performance of market systems.