Economic activity is essential to poverty reduction, and the way to ensure that the poor are included in the benefits of economic growth and development is to reform market systems. Such an approach, frequently referenced as Making Markets Work for the Poor (M4P), views market-based engagement with the poor as essential for inclusive growth and development. The basic idea is that the poor are already intimately integrated and dependent upon market systems as consumers, producers, and employees. Market systems are relied upon to sustain livelihoods and meet the needs of food and essential services, especially in areas with limited state service provision.
M4P is an approach used by development agencies to address the causes of market failure rather than its symptoms, and so seeks to change the way markets work in a way that creates large-scale and lasting benefits for the poor. At its core, M4P is aimed at systemic change based on an understanding of markets systems with a strong emphasis on sustainability. It is a broad, overarching approach that is applicable to a wide range of contexts and makes use of many development tools. M4P is typically implemented by Northern hemisphere development agencies in cooperation with local actors in such a way that large-scale change and sustainability is achieved.
M4P: Ugandan Success Stories
In Uganda, the M4P approach was successfully used to reform the prevailing radio business model. Due to the poor quality of business related programming in radio services, micro and small enterprises in rural Uganda faced significant information constraints. Because the M4P approach is premised on systemic change, the starting point of reforming radio services was in understanding the structures and practices of the Ugandan radio system and the reasons why the incentives of the media system were not pro-poor.
As compared to other development tools, M4P sought to make commercial media work better for rural Ugandan enterprises rather than just provide them with information. The success of this case was directly tied to its local ownership and incentives and the way the project was designed to fit the local context.
The project was implemented by the International Labour Organisation (ILO) in partnership with local actors and was funded by European donors such as the UK and Sweden. The project worked with radio stations to improve program innovation and quality and strengthen wider markets functions such as audience research. As a result of this project, there are now 25 stations offering 50 new programs and reaching 7 million more listeners in rural Uganda.
A Katalyst for Change
An M4P project in Bangladesh, Katalyst, resulted in higher productivity in the country’s vegetable sector due to greater access to information. The context of this case was the low productivity of Bangladesh’s vegetable sector arising from incorrect practices and use of inputs. This in turn negatively affected the potential income and nutrition effects of vegetable cultivation. In contrast to a more traditional development intervention that would have paid for the direct training of farmers, the Katalyst project worked to reform the value chain and market system.
Katalyst worked with several input supply firms to build their capacity to offer training to retailers, so that retailers would provide better information and advice to farmers. Implemented over a three year period, this project has reached nearly 3000 retailers serving approximately 1 million farmers in the vegetable sector.
M4P is an approach that has had many successes in various contexts, and aims to address the underlying constraints that prevent the effective development of market systems. Strengthening and reforming markets is a sustainable way to fight poverty at scale and help to secure higher incomes and greater access to goods and services for the poor.
The success stories of M4P demonstrate that a focus on sustainability, local context, and reform of root causes are the keys to successful reform. Perhaps most importantly, M4P explicitly designates a finite role for development agencies so indigenous market actors play more effective roles in market systems. When implemented successfully, this means that reform is scalable and brings lasting benefits to the poor.