Since November 2012, practitioners and donors alike discussed new directions centered on market building for financial inclusion in a CGAP blog series. Topics included an overview of a systems approach, lessons from a market facilitator’s perspective, and considerable discussions about monitoring and evaluation, including the tricky question of attribution.
How do these experts view new directions for funders? Their insights may surprise you.
Focus on systemic change that goes beyond institution building
An exclusive focus on institution building often misses the big picture, Mayada El-Zoghbi argued in the opening blog. Bolstered with statistics from CGAP’s Funder Survey, the big picture came rapidly into focus. It is time to update portfolios from a predominant focus on institution building, and recognize that only a stronger and more inclusive financial system is likely to deliver the diverse set of services that poor and low income people need.
“Are we as successful as we could be?” Alan Gibson asked. “We want more, better, and more beneficial transactions within the core market.” A market-building approach addresses the core market - transactions between the demand and supply sides - by leveraging interventions that influence it, such as supporting functions (e.g. information), and regulations. “If we want improvement in the core we should look at the constraints in relation to supporting functions and rules.”
Fund a market facilitator or become one.
More inclusive market development is unlikely to happen by itself. Nor will it happen without developing a strategic vision of how financial systems should work more effectively. Funders should aim to support facilitators which act as temporary external catalysts for change and work towards their own exit.
A facilitator is a multi-talented, neutral, politically-savvy catalyst. Addressing constraints that prevent markets from working effectively and building stakeholder capacity to sustain these efforts are high on a facilitatior’s agenda.
From the facilitator’s perspective, Mark Napier shared his experience with Financial Sector Deepening trusts. There is no step-by-step formula for facilitation, but there are guiding principles. Facilitators engage in activities that aim to change the way the market system works by identifying and addressing constraints that prevent markets from reaching as many people as they could. He explored three dimensions of facilitation: 1) acting as a catalyst to bring stakeholders together and provide them with information that allows change to happen; 2) empowering other people, by focusing on building capacity, motivation, and occasionally money to promote change; and, 3) leveraging the capacity of others to build systemic sustainability.
Use theories of change, degrees of evidence and plausible attribution to design, monitor and evaluate market building approaches
Design, monitoring, measurement and evaluation are part of the project cycle for any development intervention but there is a world of difference between a measurement and learning framework for a systems approach and one for traditional isolated interventions. Bloggers Sukwinder Arora, Jeanne Downing, Marcus Jenal, and Kate Lauer noted the challenges and offered solutions.
Market systems are complex, dynamic and fluid, making it difficult to predict the outcome of any intervention, or define exact targets in advance. Measurement challenges are also daunting at the start of a market systems initiative since there is still uncertainty about key systemic blockages.
A market systems project does not control who participates and who does not, creating difficulties for impact evaluations that seek to randomize treatment groups receiving project services. It also can make parts (or even all) of a baseline survey irrelevant. This is challenging for a funding agency that expects results following original project plans.
With all these challenges, how do funders balance the need for flexibility and accountability requirements with partners while ensuring effective outcomes? According to our bloggers, the answer lies in defining a monitoring and impact evaluation system that enables a rigorous assessment of market system change: Where are the influences the greatest? How does the initiative contribute to “plausible” effects on increasing financial inclusion when there are so many other and quite possible stronger influences on achieving this goal? A monitoring and evaluation system will include:
- A ”theory of change” that shows – through evidence – the robust links between market system change and financial inclusion.
- Monitoring in real time to allow for quick feedback loops for decision making to ensure adjustments are made appropriately.
- Measuring plausible impact based on reasonable assumption and a track record. USAID uses a Degrees of Evidence approach which calls for mixed methods – experimental, non-experimental, quantitative and qualitative. The intent is to develop a preponderance of evidence to attribute impact to its investments.
Market building requires an unconventional approach for most funders. It’s not for the faint of heart, as each of the bloggers in this series noted. The advocates of new directions for funders are resolute supporters of building market systems. They recognize the time lag between investments and impact, and they argue that this approach will score much better on lasting impact beyond most traditional project approaches. They continue to adapt monitoring, evaluation and impact evaluation systems to account for the dynamic nature of markets and their fluid roles as donors or facilitators. They emphasize knowledge building and collaboration among multiple market stakeholders. And they are a rigorous, persistent, and creative group of people who are paving new directions for funders.
--- The author is an independent consultant working on financial inclusion.