Access to financial services alone will not ensure poverty reduction or economic growth. With this in mind, there is a new appreciation for a market systems development approach to financial inclusion. This approach looks at the whole eco-system around the delivery and use of financial services in order to better understand and address the constraints that prevent poor and low-income people from fully participating in financial services markets.
The market systems development approach has gained significant traction among funders as it is purposefully designed to stimulate sustainable and large-scale impact beyond the direct beneficiaries of the intervention. Funders such as the U.K.’s Department for International Development have been one of the first to invest in market systems development interventions. But the systemic shifts required in the market will only be realized if more funders put their resources behind this development approach.
Photo Credit: Minh Quoc Le, 2014 CGAP Photo Contest
Ambitious development approaches require equally aspiring measurement approaches to demonstrate impact. Without the ability to demonstrate change, more funders will be reluctant to invest in market systems development programs. As is true for any investment, funders need to respond to the increasing emphasis on transparency, accountability and value for money as part of the need to provide evidence of impact in an increasingly austere spending climate. Funders therefore need to demonstrate that their investments have resulted in a change in the market. In the case of financial inclusion, this entails proving that the market systems development approach has resulted in sustained access and usage of financial services that in turn has contributed to higher development goals. Unlike traditional projects where the relationship between the provider and receiver of the intervention is more straightforward and verifiable, a market systems development approach has specific – and intentional - characteristics that make measurement difficult.
The challenge stems from the approach itself and the nature of a market that programs are attempting to influence. Market development approaches aim to stimulate change in the behavior of market actors beyond the target groups to transform the structure and dynamics of a market. As Lucho Osorio-Cortes and Marcus Jenal mention in their publication ‘Monitoring and measuring change in market systems – rethinking the current paradigm’, there are many measurement challenge associated to this approach. It is difficult to attribute changes to a specific intervention since external factors and other actors will also have had influence on the scale and nature of the changes in the same market and over time. This difficulty is compounded by the fact that these interventions occur within dynamic and evolving markets which function within a wider socio-economic and political environment. This means there is a broader range of outcomes - intended, not intended, positive or negative - associated with any intervention.
The answer to this rather challenging measurement reality is not to institute a complicated and highly structured monitoring and evaluation system. Rather, to be effective, measurement thinking and practices have to embrace flexibility and be responsive to the nature of the interventions and the market it is attempting to influence.
Over the next few weeks, the CGAP blog will explore the principles, concepts, challenges and opportunities of the measurement approaches suitable for market development interventions. Stay tuned to read more about the tensions that exist between current measurement practice and the shifts that are necessary to support inclusive financial markets.
A good article indeed and very relevant to our approaches in Market development.The most influentialchange expected in any market systems development project is crowding in and copying and market actors changing behavour.