Markets for the Poor (M4P) Training Day: Overview. Charlotte Maugham

Transcription

1 Markets for the Poor (M4P) Training Day: Overview Charlotte Maugham October 2013

2 This report has been produced by Evidence on Demand with the assistance of the UK Department for International Development (DFID) contracted through the Climate, Environment, Infrastructure and Livelihoods Professional Evidence and Applied Knowledge Services (CEIL PEAKS) programme, jointly managed by HTSPE Limited and IMC Worldwide Limited. The views expressed in the report are entirely those of the author and do not necessarily represent DFID s own views or policies, or those of Evidence on Demand. Comments and discussion on items related to content and opinion should be addressed to the author, via enquiries@evidenceondemand.org Your feedback helps us ensure the quality and usefulness of all knowledge products. Please enquiries@evidenceondemand.org and let us know whether or not you have found this material useful; in what ways it has helped build your knowledge base and informed your work; or how it could be improved. DOI: ii

3 Markets for the Poor (M4P) Training Day: an Overview The Markets for the Poor training day for the DFID Livelihoods cadre took place in Whitehall on Thursday 10 th October. This document is a summary of key points made by each speaker, through their presentations and in response to questions from/discussions with participants. The M4P training day comprised an introductory presentation outlining background and context, followed by presentations and group discussion around four case studies. An overview of each presentation is set out below but it should be noted that one major theme to emerge from all discussions was the need to mainstream gender in M4P programmes. Key points included the importance of gendered market analysis, as well as the need to establish gender-based indicators for monitoring meaningful job creation. There was also much discussion on whether investments in market development should actively encourage a portfolio mix, suggesting that some potential investments should be considered if they actively target empowering women, for example, even if they don t seem particularly commercially viable at first sight. Introduction and context Adrian Stone DFID Markets matter to poor people as producers, consumers, employees and traders but often they are inefficient, difficult and costly to access. An M4P approach aims to facilitate systemic change so that markets better serve the poor. A conventional approach involves identification of poor people s needs not being met by the market, followed by a direct intervention to meet them. An M4P approach involves the same problem analysis, followed by analysis of why the market environment isn t providing solutions. Sustainability The M4P approach should result in sustainable impact as change is not reliant on ongoing subsidy from donors or NGOs. Complex Successful M4P projects rely on understanding the wider contexts of market systems their multiple functions and multiple players. Interventions should be targeted at the right markets those sectors relevant to the poor with growth potential. The focus of an intervention should be on the root causes of why the market isn t working. Monitoring and evaluation is challenging as M4P is an engine for change rather than delivery. It involves understanding the ripple effects that have an impact beyond what s being targeted and it is hard to capture indirect impacts. Limitations M4P is not a silver bullet and often its benefits are greatest for people with land, capital and education. However, understanding systems as you try to change them is good development practice and addressing the root causes of problems can result in truly sustainable solutions. Case Study: Kenya Dairy Sector Mike Field & Mehrdad Ehsani, Kenya Markets Trust, speaking from Kenya via VC Kenya Markets Trust has three mandates: to stimulate pro-poor growth and increase net income and job creation; to build capacity for facilitating market development; and to increase public awareness of the function of markets and roles of different market actors in 1

4 Kenya. The DFID-funded programme intervenes in a diverse portfolio of market systems to spread risk one of these sectors is dairy farming. Growth potential Demand for dairy products in Kenya is growing rapidly, meaning an increased reliance on imports largely from neighbour, Uganda. If Kenya gets the sector right, it could become an international supplier itself. School milk programme has been introduced so demand will get even higher. Relevance to the poor Kenya dairy sector is driven by smallholder production accounts for a lot of jobs, so growth in the sector will have a strong multiplying effect. Many jobs created by growth will be held by women retailing milk etc. Brings regular income as milk produced year-round; offers food security as households consume milk produced. Feasibility The Kenyan dairy sector is a crowded space with many donor-funded programmes in operation some of which are market distorting. In designing a market intervention, we had to consider whether it would survive should a subsidy be given by another programme. On the positive side there was political will. Fodder market Analysis of the dairy sector showed that many farms were underproductive, particularly during dry season, because of cows not being adequately fed. A failing fodder market underpinned this problem. Systemic issues included no quality control of hay; exceptionally expensive equipment and difficulties accessing finance; and predatory existing hay suppliers capturing all the benefits and overpricing hay. Dairy cooperatives had a strong incentive to get into hay production as the more milk members produce the more commission they earn. We helped two dairy cooperatives form a joint venture, calling itself Hay and Forage, assisting them with drafting a business plan, renting them equipment, and offering after sales training. Based on this Hay and Forage rented 1,200 hectares of land and produced 60,000 bales in its first season and selling all of it, with farmers queuing up for more, owing to the hay s low price and high quality. Four or five other dairies are now trying to emulate the business model from a pilot of a few thousand, we hope soon to have 50,000 benefitting from the hay. Anecdotal evidence of impact on the dairy sector suggests that cows fed with Hay and Forage hay are producing 3 litres of milk extra each day. Exit strategy We didn t want to create any dependence so from the outset ensured none of the market actors were aware of our role in buying down risk. We should, therefore, be able to exit without the relationships between market actors falling apart as the venture seems commercially viable. Hay and Forage is now looking to double the size of its land rental and we re seeing capacity within the sector growing; and Hay and Forage is now investing its own money in farming equipment giving us confidence that the business will move away from dependence on our support. Case Study: Afghanistan Business Innovation Fund Chris Price, DFID & James Blewett, Landell Mills Multi-sectoral Challenge Fund The Afghanistan Business Innovation Fund (ABIF) was conceived in 2011 as a competitive challenge fund to give out grants to incentivise private sector investment. We look for credible investors with sensible ideas that are going to change the way that markets work. Sector selection In Afghanistan, almost every sector is eligible from a poverty reduction perspective but we looked at growth potential, innovation and change potential, and Government poverty priorities. We selected horticulture, livestock, health care services, carpets and textiles and furniture alongside a general sector that allowed us to pick up anything else with a real chance of success. We then carried out rapid analysis of each sector, identifying key constraints in poor people accessing the market, before turning each constraint identified into a challenge and inviting applications to address them. Considerations for applications Main applicant must be from the private sector and the idea must be commercially viable, technically feasible and implementable with 24 months as an investment project. First round 360 applications about half of which were ineligible; 20 projects shortlisted we 2

5 helped them develop business plans at which stage many fell out as not yet ready for such rigorous questioning of their idea. Seven grants eventually awarded calculated according to the risk and return involved in the project. Pharmaceutical sector One grant awarded went to a pharmacist looking to tackle the problem of counterfeit medicines in Kabul. Out-of-date, inadequate and poorly implemented regulation of pharmaceuticals has led to surge of counterfeit drugs in Afghanistan, with poor people in Kabul wasting an estimated ten to 20 million dollars each year buying them. Our grantee identified a commercial advantage in self-regulation, assuming that getting people to trust he was selling genuine medication would result in high sales. With our grant, the pharmacist has opened three shops and is in the process of putting together his fourth. It has been a slower and harder process than he imagined but volume of sales has increased with users citing trust as their reason for choosing his shops. Business should break even when fourth shop is opened. Cashmere sector The Herati Cashmere & Skin Processing Plant (HCS) developed a business plan to enable the cashmere sector in Afghanistan to better flourish by addressing key constraints at various production and commercial points along the value chain. A main aspect of the business plan was the procurement of a second dehairing machine, which allows HCS to significantly increase its annual production of processed cashmere, driving up demand for raw product from suppliers. HCS also partnered with the Dutch Committee for Afghanistan, which provides training to goat herders on how to better produce and harvest the raw wool, ultimately increasing the value of the cashmere they sell to traders and processors. Another key aspect of the project established rural raw cashmere collection centres, which enables remote cashmere producers to access markets. Case Study: Regional Food Markets Programme Marco Serena DFID FoodTrade East and Southern Africa is a five-year trade enhancement and promotion programme, with a focus on staple food crops. The programme comprises a challenge fund and development fund with the overall goal of improving the functioning of national and regional staple food market systems. This sector was selected because poor people are particularly sensitive to the prices of staple food, many of those engaged in the sector are women and it fits into political priorities for poverty reduction. Market analysis To talk about a single staple food market across an artificial region of nine countries doesn t make much sense. We quickly realised we must focus on particular markets such as rice or soya or legumes and the trade of them across specific borders. Four types of constraints to poor people in accessing staple food markets were identified: lack of storage and collateral management systems; missing information and coordination mechanisms e.g. farmers don t know the market price of maize; very few players in the market; policy constraints dictated by complexity of technical issues as well as the political economy and interests of governments. The Challenge Fund aims to stimulate innovative business models that deliver commercial benefits, solutions to market failures in staple food markets, and jobs, income and market access for the poor. The Development Fund invests in micro, small and medium enterprises with innovative ideas to connect smallholders to regional markets but without resources to access the Challenge Fund. Scaling up The countries we are working in are not the poorest or most difficult to work in this was part of the rationale as the market issues we are addressing are difficult enough without trying to do so in the most difficult countries. However, we are investing a lot of time and money in evaluation which shows how much we are expecting to learn from this project in the hope of identifying and scaling up what s working and rolling it out across more difficult countries and regions. 3

6 Case Study: Chars Livelihoods Programme (CLP), Bangladesh Arif Rahman DFID Context The Chars are river islands in Bangladesh, prone to flooding and natural disaster with very little investment from donors, NGOs or private companies. Typical households in the Chars are extremely poor with very basic housing conditions. The programme The first phase of CLP ( ) promoted enterprise development and piloted over 30 innovative projects creating livelihood opportunities. The second ( ) is implementing a market development approach using M4P principles through facilitating improvements in cattle/fodder markets; enabling farmers greater market access; increasing farmers productivity and income; reducing vulnerability and strengthening livelihoods. Dual approach The programme aims to combine the best features of both an M4P approach and a traditional livelihoods approach to achieve pro-poor growth and sustainable income. This is being achieved through commercialising farmers activities; facilitating farmer s involvement in the market system both through inputs and outputs; maximising potential income from farmers key assets; increasing economic activity; and building sustainable linkages between various market actors including farmers and the private sector. Challenges Low productivity is the main barrier to private sector engagement. Other issues include transfer time and cost to and from remote chars; economy of scale; supply chain; and access to finance. Early engagement with private sector to identify market constraints and how they can be overcome is necessary. Initial signs are that, where this is happening, the market development approach is contributing towards sustainable income generation but not yet for all sectors. 4

7 M4P Learning Day Signposted reading 1. Evaluating Systemic Change: How can we improve the way in which we measure impact? DFID Investment Climate Themesite, seminar note. Available at: =%2Fic%2FLists%2FInvestment%20Climate%20Themesite&Source=http%3A%2F%2Fe pe%2dinsight%2fic%2fpages%2fdashboard%2easpx 2. Guardian Development Professionals Network Top Tips to crack market-based development August, Available at: 3. A Synthesis of the Making Markets Work for the Poor Approach (intro booklet). Available at: A_Synthesis_of_the_Making_Markets_Work_for_the_Poor_(M4P)_Approach.pdf 4. Staple Food Markets Framework paper. Available at: _Staple_food_market.pdf 5. M4P Evaluation Review, ITAD 5