From Theory to Practice in the Market Facilitation Approach
Since January 1949, when a speech by U.S. President Harry Truman ushered in the modern era of international development, successive generations of theorists and practitioners have wrestled to determine the best means to deliver international development assistance to the world’s poor.
Progress has followed a steady trajectory with the number of people living in extreme poverty falling from 1.99 billion in 1981 to 896 million in 2012. In spite of such progress, many have questioned the prevailing relief-based approach to poverty reduction. The direct delivery by international aid agencies of welfare-enhancing goods and services to the poor would, they argued, lead to a temporary spike in poverty impact but leave little behind once priorities changed or the money ran out.
It is against this backdrop that the market facilitation approach was born. This approach — also known as “M4P,” “market systems development” or “making markets work for the poor” — gathered momentum during the late 1990s and 2000s. In July 2008, the Springfield Centre ran its inaugural Making Markets Work training course in Glasgow, Scotland. In September 2015, CGAP issued “New Funder Guidelines: Market Systems Approach to Financial Inclusion.”
Today, making markets work for the poor is a relatively well-understood concept. It focuses on harnessing the power of market systems, including their full range of participants — from suppliers and consumers to rule-makers and support services providers — to deliver benefits for poor men and women on a lasting basis. It seeks to achieve and maintain a careful balance between public and private sector interests, between the bottom-line and the bottom of the pyramid.
To do this, programs work closely with market players to understand market dynamics and test whether or not necessary behavior changes can endure (“adopt” and “adapt” in M4P speak). At other times, M4P programs work with a diversity of players to encourage behavior and practice changes to deepen and broaden the market system responses and improve the functioning of support systems (“expand” and “respond” in M4P speak).
Nonetheless, evidence from the field about how to apply the market facilitation approach in practice remains fairly limited and is often poorly documented. Despite some good examples, there is a general dearth of material that captures which interventions work, which do not, and why. Accordingly, there remain important unanswered questions, such as: How should practitioners balance pressure for short-term results with slow-burn market development activities? What does effective communication and measurement look like, and what can it achieve? What attributes do successful market facilitators possess? How does crowding in and replication take place in practice? How and when do market facilitators look to exit? How is it best to select, engage and work with partners?
To help answer these questions, in June 2015, FSD Africa commissioned the Springfield Centre to produce a comprehensive case study of FSD Kenya (a financial market facilitation agency in Nairobi) and six mini-case studies of the wider FSD Network’s financial market facilitation interventions, such as those by the FinMark Trust, FSD Kenya, FSD Tanzania and FSD Zambia. Numerous lessons emerge, but perhaps the most interesting center on:
Communications. Beyond building the credibility to operate as a market facilitator, communications work plays a strategic and tactical role. Carefully orchestrated communications activities can influence key people and processes at critical moments to shape the development of inclusive markets. For example, to kick-start the design of a pro-poor product in Kenya, FSD Kenya gave Eric Muriuki, CBA’s Head of New Business Ventures, a copy of the book “Portfolios of the Poor.” This small gesture played a not insignificant role in the development of the M-Shwari story.
Measurement. Measurement is, of course, best-known as an accountability tool, but within market development programs it plays a fundamental role. Done well, it sets a clear vision and enables practitioners to both prove and improve the impact of their interventions. In South Africa, FinScope data on the level of financial services uptake is clearly valued by those syndicate members who pay for it annually. However, might FSDs gain greater traction with their market insights if they could better-track how their data is used? Indeed, would this encourage more market players to pay and sub-markets for this type of intelligence to form?
Talent management. Financial market facilitation places tough demands on its practitioners. Time and again, the case studies demonstrate that market facilitation works best when hard technical skills like financial and development economics combine with softer interpersonal skills like negotiation, trust-building and persuasion. This fact raises important questions about how market facilitation programs recruit, develop and incentivize their staff members.
Taken together, I hope that these case studies contribute useful learning to the theorists and practitioners that work in the field of market facilitation. For FSD Africa, the case study material will be put to immediate use in the FSD Academy M4P course, a five-day training program for staff from the FSD Network and beyond. I warmly invite others to use and share them as appropriate and hope that they refine and strengthen our ongoing effort to reduce poverty through market facilitation.