Market Facilitation Synthesis- Final

The Market Facilitation Initiative

Conference Synthesis

State of the Practice in Market Facilitation September 29 to October 3, 2008

Copyright © 2008 The SEEP Network

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Conference Synthesis: State of the Practice in Market Facilitation For additional information or to order additional copies, contact The SEEP Network 1875 Connecticut Avenue, NW Suite 414 Washington, DC 20009-5721 Tel.: 202-464-3771 Fax: 202-884-8479 Email: [email protected] Web: www.seepnetwork.org

Conference Synthesis:

State of the Practice in Market Facilitation

Authored by Jessica Elisberg, The SEEP Network Tracy Gerstle, formerly of CHF International Luis ‘Lucho’ Osorio, Practical Action

Edited by Sabina Rogers, The SEEP Network

Table of Contents Introduction ............................................................................................................................................................................... 1 Effective Facilitation & Its Challenges ............................................................................................................................. 2 Facilitation of Horizontal Linkages .................................................................................................................................. 3 Strategic Use of Subsidies .................................................................................................................................................... 4 Exit Strategies ........................................................................................................................................................................... 5 Using Monitoring & Evaluation Tools for Facilitation .............................................................................................. 6 Resources .................................................................................................................................................................................... 7

Introduction The Market Facilitation Initiative, coordinated by Tracy Gerstle and Lucho Osorio, is one of the learning initiatives of the Enterprise Development Exchange (http://edexchange.seepnetwork.org) and the first joint venture between The SEEP Network and the Livelihoods Network. It aims to assist practitioners working in Pro-Poor Market Development to move from market assessments and program design to implementation by advancing practical principles, techniques, and tools. Currently, there is a wide body of resources on how to conduct market research and program design for market development programs. However, there is far less available on the “how” in terms of program implementation. This initiative aims to promote program implementation and market facilitation methods that achieve scalable impact and sustainability. An opening step in this Initiative was a five-day online conference held from September 29 to October 3, 2008. Over 170 practitioners representing organizations all over the world signed up for the conference and 28 participated actively. The goals of this learning event were to gain a better understanding of the state of market facilitation practices and to identify concrete needs and knowledge gaps that can be addressed by the Initiative. These goals were approached through discussions that focused on the following topics: Effective Facilitation & Its Challenges Facilitation of Horizontal Linkages Strategic Use of Subsidies Exit Strategies Using Monitoring & Evaluation Tools for Facilitation In addition to this synthesis, follow-up outputs to the Market Facilitation Initiative Online Conference will include a Literature Review and a series of knowledge products from each of the volunteer teams involved in the Initiative. These documents will be made widely available through The SEEP Network and the Livelihoods Network.

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Effective Facilitation & Its Challenges The conference opened with the following definitions: Pro-poor market development seeks to promote changes in market systems that generate positive, sustained impacts for a large number of marginalized enterprises and households in terms of income, employment, and access to products and services that better their lives. Facilitation of pro-poor market development is an approach to poverty reduction that aims to assist market stakeholders, both private and public, in building relationships and undertaking collective actions that enhance their ability to continuously improve upon productivity, thus resulting in competitiveness and sustained economic and social gains. Participants were asked to share their thoughts on the preceding definitions and to describe both the characteristics of good facilitation and the challenges of facilitation market development programs. The definitions of development and facilitation were generally accepted and discussion focused on the challenges and characteristics of good facilitation. Common challenges included Overcoming inadequacies in infrastructure and services as well as market failures; Identifying and including all stakeholders in the market development process; Bringing stakeholders together, gaining trust, and achieving buy-in; Allowing stakeholders to reach their own conclusions and generate their own ideas, rather than leading them to answers; Building staff capacity for good facilitation; Acquiring accurate information to understand the big picture of market structure, dynamics, blockages, and opportunities; Ensuring that program funds are adaptable to changing circumstances; Reaching scale; Determining whether NGOs and other non-profit actors can serve as effective facilitators; Recognizing that effective market development requires much more than facilitation. Frequently-cited characteristics of good facilitation were closely tied to the ability to overcome the aforementioned challenges. Additionally, good facilitators have An openness to new ideas and flexibility; Motivation to foster linkages between initiatives and programs; Patience and significant investment of time; Sound organization and coordination skills; An ability to inspire collective vision and collaboration.

The SEEP Network and the Livelihoods Network – The Market Facilitation Initiative

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Facilitation of Horizontal Linkages The second day of the conference focused on horizontal linkages (i.e., linkages that connect actors of the same type such as cooperatives and producer networks), asking participants how they facilitate such linkages in order to enable scaling up, which local actors have incentives to promote horizontal linkages commercially, and whether this promotion is a task that facilitators sometimes need to undertake. The discussion also addressed the risk of producer groups becoming dependent on or vulnerable to powerful lead firms. Participants suggested a number of applicable principles for the facilitation of horizontal linkages, including: Promote connections between producer groups and diverse actors in input and output markets; Encourage vertical linkages through alliances, multi-stakeholder platforms, interest groups, or forums; Blend subsidized capacity building with facilitation of vertical commercial linkages; Use market information services to reduce imbalances of power between producers and traders; Avoid processes that make producer groups vulnerable or dependent; Keep in mind the bigger vision of the market and remember that markets are embedded in social systems; Remember that socio-economic, cultural, political, and geographic context plays a big role in determining the optimal structure of horizontal groups. Additionally, a number of tools and practices were mentioned, specifically: Subsector selection; Market mapping; Capacity building; Production of communication and training materials; Visits from marginalized producers to other businesses. The discussion also highlighted some critical considerations for facilitators when addressing horizontal linkages: Facilitation should not involve forcing ideas upon a group, which may be difficult when balancing contradictory demands from stakeholders and development agents; Facilitation is appropriate in situations where interest already exists; NGOs, buyers, service providers, and government agencies can all contribute to the emergence and scaling-up of linkages; It is important for all actors involved in developing linkages to understand the broader issues related to market systems, which requires access to knowledge that may be beyond the immediate reach of the facilitator.

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Strategic Use of Subsidies The third day of the conference focused the conversation on the use of subsidies in market development programs, opening with the following comment. “Facilitators can leverage subsidies to promote opportunities and encourage new behaviors by lessening risks at the outset for market stakeholders to test new ways of doing business that make markets more competitive and inclusive. However, there seems to be a lack of tools for identifying when and how to use subsidies. Many facilitators consider activities which will have recurring costs inappropriate for subsidization, whereas subsidies for one-time expenditures that lead to greater outputs could be merited.” Participants were asked whether this “rule of thumb” is sufficient guidance for considering the use of subsidies, and if not, what other factors need to be taken into account. The discussion centered on both appropriate application of subsidies and ways in which to evaluate the use of subsidies. Regarding the appropriate use of subsidies, discussants agreed that subsidies can be useful as a means of kick-starting activities and encouraging market stakeholders to undertake risk or to change their behaviors. On the other hand, subsidies can also limit the potential scale of a project and distort the market, which leads to self-defeat in the long run. The group did not reach an agreement regarding objectives for which subsidies are an appropriate tool. Participants also discussed key questions to ask when either considering implementation of a subsidy or evaluating a subsidy that is already being used. Central issues included: Collecting accurate information; Evaluating alternative approaches besides subsidies; Having a clear understanding of the subsidy – including perceived need, who the recipients are, timeframe, recurrence, and monitoring and evaluation; Ensuring sustainability of the activity after the subsidy ends. Comments from participants indicated that there is a lack of tools and thorough guidance on the use of subsidies in market development programs. This suggests that a potential activity for the Working Group is to develop a set of tools that assist practitioners in determining if, when, and for what purpose subsidies may be appropriate in their programs.

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Exit Strategies The fourth day of the conference addressed exit strategies. Exit strategy is a common term in the facilitation literature, but there is an absence of tools and principles to help facilitators understand how to exit the facilitation process without jeopardizing sustainability. The discussion opened with the following questions: What elements should be included in project design to create conditions for a smooth exit? Are there any signals that a facilitator can pick up on to plan and adjust the exit strategy? How should a facilitator communicate his/her intention to exit the process in ways that do not affect engagement and commitment from market stakeholders? Some of the key principles that were identified in designing and implementing effective exit strategies include: Attentive and flexible project design processes that involves relevant market actors; Consideration of the exit strategy from the very beginning and throughout the project cycle; Clear and constant communication with stakeholders about the exit strategy as well as the facilitator’s role; Design that reflects market demands and what makes business sense; Close monitoring to ensure that the exit strategy reflects reality and recognizes when market actors begin to take the initiative; Identification of existing organizations and institutions that can take the facilitation process further. Participants’ comments indicate that there is no comprehensive toolkit to help facilitators design effective exit strategies. The construction of a toolkit, guidelines, and principles for exit strategies would be useful in addressing many of the concerns and challenges that were brought up in the discussion, such as: How the institutionalization of facilitation (i.e. the growth of permanent development bureaucracies) affects the market development and the exit processes; How to effectively engage actors who are fundamental to the success of the process but may be uncooperative; Whether facilitation skills should remain within the market system or whether market development should continue as part of the core business and activities of market stakeholders after the facilitator’s exit; What indicators could be used to help facilitators know when to exit; How to ensure sustainability of interactions between stakeholders after the exit.

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Using Monitoring & Evaluation Tools for Facilitation The final day of the conference opened with observations about M & E tools: M & E tools and approaches focus too heavily on programmatic impact, making it difficult for managers to track ongoing progress of their interventions; Facilitators need tools that enable them to monitor progress in trust-building and coordination amongst market actors as well as ensuring the ongoing relevance of their facilitation as market trends evolve. Conference participants were asked to weigh in on whether they agreed with these observations or not and to provide examples of how they determined ongoing relevance of their programs or how they used M & E as a programmatic tool. Additionally, they were asked what types of information are needed to effectively use M & E and what monitoring & evaluation can be used for outside of measuring impact. The discussion focused on two main topics within the category of monitoring & evaluation: the link between M & E and exit strategies and the need to incorporate both qualitative and quantitative indicators. The following observations were made on the link between M & E and exit strategies: Quantitative indicators should be included as part of the process of designing an effective exit strategy; Data from M & E should inform the decision-making process regarding when and how to exit; M & E should also include indicators that measure the facilitation process itself and the success of an exit. A common opinion amongst participants was that quantitative indicators alone are insufficient for effective M & E, and that it is necessary to include qualitative measures as well. The discussion on qualitative indicators included these highlights: Standard of living and other indicators, such as changes in decision-making in a household, should be used to gain a more complete picture; Tools such as the Relationship Matrix can be used to measure changes in relationships between key market actors; Participatory methods of M & E, including Stories of Change and case studies, can be an effective means of collecting information about the facilitation process and impacts; Donors are sometimes over-reliant on quantitative measures and may be averse to change; Introducing qualitative methods of M & E and convincing staff to internalize them can be challenging. General consensus on M & E indicated that it should be a continuous process that leads to improvement through a system of data collection, analysis, results sharing, and decision-making. However, a concern was raised that M & E can lose its utility when too much time is spent on complicated processes or when it is outsourced to an external actor who may not fully understand the context.

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Resources Theme: Facilitation Conflict-Sensitive Approaches to Value Chain Development (USAID) Supporting Small Forest Enterprises: A cross-sectoral review of best practice (IIED) Toolkit for Facilitation of Small Forest Enterprises (Forest Connect) Theme: Horizontal Linkages Generating Higher Revenues for Farmers (News article from Pakistan) Improving Production of Dry Fruits (News article from Pakistan) Theme: Exit Strategies Constraints-Solution-Solution Provider-Intervention Continuum; Program Design for Value Chain Initiatives (MEDA/PML) Performance Measurement Framework (CIDA) Theme: Monitoring & Evaluation Relationship Matrix (Practical Action Bangladesh) M&E Action Plan for Making Markets Work (Practical Action Bangladesh)

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