Pmsd Short Intro, Rev2

Participatory Market Systems Development (PMSD) A short introduction to the the Markets and Livelihoods Programme approach to Making Markets Work Better Better for the Poor markets are not working well for the poor Markets are a powerful and versatile mechanism to get services and products to people who can afford them but they are not totally efficient, equitable or inclusive, especially in contexts where poverty is acute. The causes of inefficiency, inequity and marginalisation are many and not fully understood but some of them are widely accepted. For example: • • • •

blockages in the flows of market information and other types of knowledge (e.g. illiteracy and lack of communications infrastructure) weakness of public institutions dedicated to the promotion of trade, rural development, agricultural research, education, law enforcement, etc policies, social norms, and legal frameworks that fail to promote investment, transparency, competition and sustainable use of natural resources excessive concentration of power and influence in the hands of a few actors

Markets have the potential to connect marginalised producers to a large number of people and give them access to valuable commercial and social relations, technologies, experiences and assets that can help them escape poverty. The Programme is exploring a participatory and systemic market development approach to make that potential a reality for millions of rural families worldwide.

how do we understand markets? Markets are complex, open and ever-changing systems composed of a wide variety of actors who are • interacting through many different commercial, social, political, and cultural relationships • interested in a particular set of products or resources • making the best they can with the skills, assets and resources they have • influenced by actions and intentions of others and the contexts and issues around them

key features of PMSD •

Participatory: Understanding market systems, identifying blockages, problems and opportunities and undertaking actions to make them work better for all, in particular for marginalised producers, cannot be done by one or a few organisations; this is a challenging endeavour that requires sustained participation and collaboration of a wide variety of market actors, civil society organisations, academics, practitioners, researchers and decision-makers. • Systemic: A market system is composed of actors and the relationships amongst them. A successful market improvement requires the transformation of both actors and relationships. However, changes in one actor or relationship will have impacts on different parts of the market system that are very difficult to fully understand or predict. We cannot attempt to transform complex market systems using linear thinking and top-down, rigid planning. We need to balance our planning with enough flexibility to adapt to the reactions of the market due to our initiatives or to external events such as economic and political crises, violent conflict, changes in consumer trends, new technologies, and natural disasters. Rev 2. Feb 2008 1

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Inclusive: Inclusive Market actors are not inherently good or evil; most of them are trying to optimise their outcomes from the role, position, and resources they have in the system. Many of them are doing what they do because they have to, not because they want to. For example, some people see intermediaries as exploitative or unnecessary. We prefer to create the conditions for an inclusive interaction where the voices and views of multiple actors are heard and debated and from where initiatives to improve the market emerge. We act as facilitators of market transformation processes that should be led by market actors themselves in order to be sustainable. However, we also need to have adequate knowledge and expertise about the markets we want to transform in order to have the credibility to promote successful dialogue and collaboration. SubSub-sectoral: The approach focuses on a specific product or ‘sub-sector’. The product defines who belongs to the system and what issues or opportunities are important. In other words, the product defines the system’s boundaries. We are aware that this has both advantages (e.g. better communication amongst actors) and disadvantages (e.g. risk of neglecting external factors to the system but critical to its functioning). Multidimensional: ultidimensional: Economics is just one piece of the puzzle. Social, political and cultural factors are equally and in some cases more important than economic or commercial factors. For example, a farmer might not sell to the buyer who pays him more because he does not like his political views or because he has traditionally sold his produce to a member of his extended family. Contextual: ontextual Context is fundamental to understand a market system and define strategies to transform it. Market actors do not operate in a void; their decisions and intentions are affected by many issues than can be within or outside of the boundaries of the market system. For example, cultural traditions, geographic location, political institutions, etc.

the market map: map: a powerful framework and participation tool In order to make some sense out of the complexity of market systems, we use a model that splits markets into three spheres that are constantly interacting and influencing one another. The actors in these three fields, the relationships amongst them and the forces that influence those relationships constitute a market system. These three spheres are: • •

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Market chain: chain: the chain of actors who own the product as it moves from primary producers to final consumers. For example, farmers, intermediaries, processors, exporters, wholesalers and retailers. Input/service providers: the inputs and business/extension services that support the chains’ operations. For example, fertilisers and tools sellers; microfinance institutions, banks, extensionists, transporters, business advisors; agricultural research institutions; packaging designers and cooperatives providing health or education services. Business usiness environment: environment: Infrastructure, policies, institutions and processes that shape the market environment. For example, roads, quality of the soil, water sources, telecommunications, agricultural policies, market trends, business ethics, transparency and accountability and business organisations who can influence regional or national governments.

The market map does not only provide us with a theoretical framework to design our initiatives; we use it in Participatory Market Mapping Workshops as a visual tool to promote dialogue, reflection, awareness, and systemic thinking amongst a wide range of market actors and policy-makers1.

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A good reference for PMM is the paper by Mike Albu and Alison Griffith (2006): Mapping the market: participatory market-chain development in practice, Small Enterprise Development Vol. 17 No. 2, pp 12-22. You can find this paper in our website: http://practicalaction.org/?id=mapping_the_market or a longer version at http://www.bdsknowledge.org/dyn/bds/bdssearch.details?p_phase_id=465&p_lang=en&p_phase_type_id=1

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transforming markets: how how are we doing doing it? Transforming a market system in a participatory way requires the promotion of three fundamental processes (note that each process is not undertaken by us but by other actors). A successful PMSD process has to adequately promote all three processes. processes The activities we implement and the strategies we use to facilitate these processes vary in each case.

EMPOWERMENT FOR ENGAGEMENT Our vision: Informed and empowered small-scale producers explore and exploit more and better business opportunities for themselves and their communities. To promote this process we facilitate the selection of groups of farmers or associations by their peers. We pay special attention to the integration of women into these groups. We work to improve their knowledge about the markets they want to engage with, increase their confidence to interact with other strategic actors (e.g. buyers, service providers and policy-makers) and their ability to articulate and communicate their situation, problems and potential to others. We also create conditions to enhance dialogue, accountability and learning between these groups of farmers and their peers. Striking a good balance between market growth and the potential of marginalised producers to compete in the market is essential for effective market development facilitation. We assess both market growth trends (i.e. how demand is changing through time) and the chances of success that empowered producers would have if they were selling their produce under improved conditions and new actors. The approach and contents of our empowerment-related activities depend on these assessments and on the current situation of marginalised producers (e.g. the assets they have, what they know and their context)

INTERACTION FOR TRANSFORMATION Our vision: A wide variety of strategic actors such as marginalised farmers, traders, buyers, processors, service providers, policy-makers, governmental agencies, researchers, and civil society organisations collaborate in different ways to improve the market system. In order to facilitate this process we need to attract strategic individuals and organisations to work with us to improve the market system as a whole. We try to engage them on the basis of their interests and the possibilities that imperfect markets offer to build win-win outcomes. For example, quality and policy improvements can generate intense interaction and collaboration for market transformations amongst a wide range of strategic and usually competing actors; whereas improvements in price cannot because a gain for one actor is a loss for its neighbour in the chain. We create spaces for dialogue, debate, trust-building, win-win relationships, business explorations and joint action. Some examples of these spaces are participatory market mapping workshops, interest groups or forums and business fairs. In some cases, it is necessary to use special tools, such as vouchers and guarantee funds, to motivate key market actors, especially service providers, to experiment with new business ideas and models and engage with new potential buyers. For example: a bank lending to marginalised producers, a farmer giving technical advice to his peers for a fee and farmers experimenting with a new technology.

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COMMUNICATION FOR UPTAKE Our vision: Influential actors (e.g. policy-makers, media and entrepreneurs) convince others outside of the project’s scope to adopt or adapt lessons and business models emerging from it in other initiatives and contexts This process plays a crucial role when it comes to scaling up market transformations for the benefit of a large number of marginalised producers and other market actors in similar markets. Without it, successes and lessons produced by our initiatives would probably remain contained within the areas of our direct influence. Ideas that inspire other market actors and policy-makers about new and better business practices or models, more appropriate and pro-poor public policies, and higher quality and more affordable services are fundamental to face the challenge of improving the livelihoods of millions of small-scale producers worldwide. In order to make this process work, we are constantly improving our research, learning and communication capabilities to understand how market transformations occurred, what the success factors were and what processes were critical; we distil knowledge trying to strike a balance between theory and practice, and package it to make it interesting for different audiences.

the role of technology in our PMSD approach Technology is crucial to transforming market systems. It helps small-scale producers and others in the market system to improve productivity and efficiency, conserve natural resources, reduce costs, enhance communication with buyers and suppliers, and to access new knowledge. Market actors in general and small-scale producers in particular need easy access to good quality information, technical skills and knowledge. They require the capacity to choose the technology they want, learn about it and adapt it to their situation. The processes of empowerment and collaboration mentioned earlier play a crucial role in this regard. Improving the relationships between small-scale producers, traders, buyers, processors, policy-makers, researchers and inputs/service providers contributes hugely to their ability to make appropriate technology choices and provide technology suppliers with abundant information to make adaptations and improvements. Within the category of input/service providers we find individuals and businesses that specialise in the development and provision of hardware (e.g. equipment, tools, and vaccines) and software (e.g. technical skills, methods and standards). They play a fundamental role in the processes of technology transfer and innovation in any agricultural market. We work to promote access of marginalised small-scale producers to local, national or international providers using market-based mechanisms and the emergence of vibrant technology and knowledge markets that respond to their needs. Technology change occurs within the wider context of social, political and economic innovation. A group of farmers who set up a business venture or association; farmers addressing policy-makers to reduce their tax burden; or a group of farmers and buyers implementing a new, more transparent and equitable business model. These are all examples of where wider social, political and economic processes may unlock opportunities for technology innovation among producers, researchers, service providers and buyers. By connecting stakeholders together around specific, shared objectives, PMSD provides a unique opportunity to place technology innovation within its wider context and transform markets in a sustainable way.

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