DevLearn Digest 5 – Institutionalising Market Systems Development

Hi everyone,

We have a bit of a special newsletter this month, summarising recent discussions we’ve been having on how to institutionalise market systems development (MSD). We hope you find the tips and ideas below helpful – please email us to let us know any feedback!

Why institutionalise market systems development?

When done right, market systems development (MSD) challenges traditional ways of working in development. It asks donors to acknowledge uncertainty and abandon futile attempts to control the details of implementation. It requires programmes and implementers to act less and think more, reducing their visibility and investment where possible, and prioritising local knowledge and partnerships. It requires everyone to work with more humility and honesty.

Consequently, MSD is not an easy approach to follow. It rubs up against all sorts of incentives for personal careers and organisational development. Across the world, in different donors, NGOs, and projects, MSD enthusiasts are trying to drive it forwards regardless. DevLearn brought 17 such people together, from eight different international NGOs, to discuss how they can institutionalise MSD throughout their organisations.

This newsletter summarises these discussions and proposes three principles for institutionalising MSD. The principles are to Define, Inspire, and Guide (DIG) – proof that not every newsletter comes with a memorable acronym. These principles are not exhaustive, and we hope that others can add and extend this list.

Define: Articulate what Market Systems Development means for your organisation

MSD means different things to different people. Some stress the importance of understanding and addressing the root causes of market failure (while others disagree). Others emphasise the need to make markets work better, and others stress the importance of facilitation and local partners. Some focus on the micro-level, while others focus on the meso. In practice, many associate MSD with the use of particular tools (especially those outlined in the M4P Operational Guide); which are themselves contested.

Of course, these different framings are complimentary. The tools from the M4P operational guide diagnose the root causes of market failure, which informs a facilitative way of working, and thus make markets work better. There is no single definition of MSD, any more than there is a single definition of development itself. Still, it is important for an organisation seeking to institutionalise MSD to arrive at a clear understanding of what does – and what does not – count as MSD. This can help eliminate misperceptions, such as that MSD is only about working with the private sector. It can also help differentiate what is unique about MSD.

Practical tips:
  • Set out core principles of MSD. Consider a set of ‘minimum requirements’ which must be met to count as an MSD project.
  • Reduce jargon and use clear language where possible. Think about how to communicate the key principles to non-English speakers, or people for whom English is not their first language.
  • Show how the core principles can apply to other sectors outside livelihoods. Governance, water and sanitation, and shelter, for example, could all benefit from a hefty dose of MSD principles.
  • Develop case studies and examples of what a good MSD project looks like.

Inspire: Help people understand the impact that MSD can have

Institutionalisation works best where people really understand the impact that MSD can have. Consequently, the potential scale, sustainability, and impact of the approach should be front and centre of communication. Encourage people to experiment with the approach because they believe it works, not because they are told to do so.

It helps to link to other organisational or global agendas. For example, the Grand Bargain, among other international agreements, aims to improve the localisation and participation of development programmes, which potentially has great synergies with the MSD approach. There is international momentum on addressing environmental challenges and improving urban environments, market-based problems which hold great potential for market-based approaches. By linking to these agendas, you help to show how MSD addresses the existing challenges of an organisation.

Finally, it is also critical to recognise the potential conflicts between the MSD approach and organisational priorities, and address these in the definition or messaging. For example, NGOs frequently seek to target the poorest households, or focus on social inclusion and protection outcomes. While these are certainly compatible with an MSD approach, it cannot be assumed that an MSD approach will automatically reach the poorest. Similarly, some sectors (such as nutrition) have a historical nervousness around working with the private sector, so need nuanced communication when implementing an MSD approach.

Practical Tips
  • Focus messaging on the impact of MSD. Develop messaging guidelines, and implement them throughout your training, case studies, and webinars.
  • Openly address concerns around the MSD approach, such as whether it targets the poorest. You could either consider this as a limitation of the MSD approach (with other approaches complementing it, such as the graduation approach) or design your MSD tools and systems so that they address these concerns.
  • Use champions within the organisation, case studies, and evidence of the MSD approach (ideally drawn from projects from within your organisation).

Guide: Help team members implement the MSD approach

The MSD approach sounds easy to implement in principle, but is really hard in practice. Staff are often over-confident that they know what MSD is – or afraid to admit otherwise. This is particularly challenging with senior staff, who may feel embarrassed admitting that they don’t know what they’re talking about. We have seen plenty of examples of projects that started with great ambitions and lofty principles – but quickly fell back to old ways of working when faced with the pressures of implementation. Consequently, spend time and effort thinking how you can guide people in MSD implementation.

Practical tips
  • Start by recognising the strengths of existing practices and seek to improve rather than criticise.
  • Understand how people in your organisation learn. What sources of information do they go to, and how do they access it? For example, people often learn from their colleagues, so think about how to build communities of practice around MSD.
  • Draw links between the MSD approach and the personal experience of staff. Staff in country offices often have experience in the private sector, running businesses or owning their own farms in the relevant sectors. Consequently, they often have an intuitive understanding of how markets function, and a deep background knowledge to draw from. Make sure you draw on this in training and workshops.
  • Work particularly hard to build the capacity of your implementing partners in MSD. This can also have broader effects past your project, as they are likely to also work with other donors and projects.
  • Set out a core set of tools that can be used for MSD, drawing and tailoring existing tools in usage in the sector.
  • Put in practice simple processes and tools, that allow teams to strengthen their systems without taking on the approach in full. For example, a simple change might be to require a market assessment before any new relevant programme starts.

I hope you find the tips useful! Let us know if any resonate with your experience if you have tried any out (with good or bad results) – and if we missed anything,

All the best,

The DevLearn team