The public sector (referring to government, regulators, as well as relevant civil society institutions) represents key players in most market systems, defining the rules of the game. When the government is not playing this role effectively, it can have wide implications for market effectiveness, especially when a given market context lacks adequate regulation.
While many MSD interventions focus on working directly with businesses and consumers, influencing policy and regulatory frameworks can be a powerful way to create an enabling environment for market development and unlock large-scale impact. Policy-related work within MSD requires a distinct skillset and a careful understanding of the political economy (see political economy analysis in these guidance pages for more). It involves navigating complex power dynamics, building relationships with government stakeholders and advocating for evidence-based reforms.
How to change public policy using an MSD approach includes a presentation and video recording outlining the tactics and strategies used by LIWAY to influence public policy for the benefit of urban women and young people.
Why policy influence matters in market systems
Policy and regulatory frameworks can significantly impact the functioning and inclusivity of market systems. For example, they can:
- Support a level playing field. By establishing clear rules and regulations, governments and regulators can enable a more predictable and transparent environment for businesses to operate. This reduces uncertainty and encourages investment.
- Address market failures. Policies can be used to correct market failures, such as information asymmetries, externalities (e.g. pollution and negative environmental impacts), as well as provide public goods (e.g. infrastructure).
- Promote inclusivity. Policies can be designed to specifically target marginalised groups, such as women, youth or rural communities, and provide them with greater access to economic opportunities.
- Incentivise innovation. Incentives such as tax breaks or subsidies can help encourage firms to adopt green or other beneficial practices and spur innovation in nascent sectors.
Key principles for policy-related work in MSD
- Continue to apply a systemic perspective. Focus on policies that have a broad and lasting impact on the entire market system, rather than narrow, project-specific changes.
- Make sure that reform is demand-led, ensuring that policy reforms are based on the needs and priorities of market actors, not just the preferences of the programme or its donors.
- Make sure your advocacy is evidence-based. Advocate for policy changes based on rigorous evidence and analysis.
- Involve a diverse range of stakeholders in the policy dialogue, including government agencies, businesses, civil society organisations and groups representing your target population.
- Keep your eyes open to political realities. Consider the political feasibility of proposed reforms and tailor the advocacy strategy accordingly.
Bending the rules can be used as a key reference for market systems or private sector development projects looking to work more effectively in the policy realm.
Common policy influence tactics
MSD programmes may choose to address a policy-related issue by reforming existing regulations, improving transparency and ‘fair play’ by certain institutions, or increasing the enforcement of rules. This could involve (amongst others) the following tactics:
- Providing evidence and analysis: providing policymakers with rigorous evidence and analysis to support the case for policy reform. This may involve commissioning research, conducting surveys or preparing policy briefs.
- Drafting policy recommendations: working with government officials and other stakeholders to draft concrete policy recommendations and legislative proposals.
- Public awareness and advocacy: raising public awareness about the need for policy reforms and mobilising support for the programme. This may involve working with media outlets, organising public forums or launching online campaigns.
Achieving policy change in Ethiopia through a market systems approach describes how the Land Investment for Transformation (LIFT) programme pioneered an innovative strategy that applies a market systems approach to land certification.