Making Markets work for the

Poor (M4P)

DFIDs experience

Structure of this presentation

1. What M4P is and why it matters
2. DFID involvement
3. M4P in practice
4. M4P issues
5. Proposed next steps

1. What M4P is...

M4P: temporary and catalytic interventions to overcome

the main failures and constraints in markets that are
important to the poor

influencing the development of market systems so that

they offer increased opportunity and benefits for poor
people

M4P features: Systemic and institutional change; the use

of market-based incentives to leverage the enterprise
contribution to development and ensure sustained impact

Successful M4P interventions lead to sustained pro-poor

growth, and better opportunities, incomes and choices for
poor men and women

M4P key features

Aimed at

Systemic change
Based on an understanding of

Market systems
A strong emphasis on

Sustainability
Implementation through

Facilitation
Overarching approach

The systems around the

poor
Large-scale
Causes not symptoms
Close knowledge of:
functions and players
constraints and opportunities
View of the future shapes
interventions now
Who does/who pays
framework
Crowding-in other market
players and activity
Key principles and frameworks
Applicable to wide range of
situations and using many
tools

and why M4P matters

Well functioning markets that support competition and
lower the costs of doing business provide incentives for
trade and investment leading to growth and poverty
reduction
Markets a key linkage or transmission mechanism
between the lives of the poor and the wider growth and
economic integration process.
New data (the next four billion) describes a substantial,
poorly served, informal, and hence inefficient and
uncompetitive market at the base of the pyramid.
Markets often dont work well for the poor, excluding them
from the benefits of growth. Informality is a poverty
trap.
M4P a means to ensure growth is pro-poor growth.

2. DFID involvement
2000 framework paper
2006 lesson learning
2008 M4P at core of
DFID private sector
strategy
2008/09 M4P
knowledge
management initiative

South Africa
FinMark, ComMark,
LandMark
Kenya, Nigeria,
Uganda
Bangladesh
Katalyst
Vietnam
Nicaragua, Bolivia

Rationale
1. Inclusive growth is the best way
to get people out of poverty and
is the exit strategy for aid. Growth
driven by private sector investment
and productivity. Well functioning
markets that support competition
and lower the costs of doing
business provide incentives for trade
and investment
2. The poor are dependent on poorly
functioning inefficient markets for
the livelihoods.
M4P a practical way to contribute
to shared growth?

Understanding BOP markets

the next four billion

Significant Unmet Needs

(telecoms, finance, housing, health, transport)

Dependence on Informal or subsistence

livelihoods a poverty trap
the BOP penalty the poor pay more

M4P and Growth Diagnostics

Trade regime
Infrastructure

Macroeconomic
Stability

Sustaining
Growth

Political Stability

Market coordination failures e.g. agriculture

and processing

Microeconomic risks
tax, corruption,
crime, property
rights

Market failures
e.g. finance,
information

M4P interventions in relation to

market failures (macro)
Issue/Market Failure

Intervention

Public Goods (market

undersupply)

Govt Investment or PPP

Monopoly
Abuse of Market Power

Competition Authority
interventions unbundling etc

Externalities spillovers not

priced in market e.g. pollution,
global warming, skills
development, merit goods

Fiscal interventions
Emissions markets
Collective action by firms
PPP

M4P interventions in relation to

market failures (meso/micro)
Issue/Market Failure

Intervention

Unequal Access to Information

Public interventions
Market Development / private participation
(e.g. ICT, credit bureaux etc)
Collective action and network development

Excessive Costs and Risks of

Transactions
Coordination failures no
access to supply chains
/hierarchies
Indivisibility (minimum
transactions sizes)

Risk reduction
Guarantees
Value chain interventions
Institutional innovation e.g. Contracting,
Collective Action
Market facilitation and Development

3. M4P in practice
influencing the
development of
market systems so
that they offer
increased
opportunity and
benefits for poor
people

1. Setting Strategic Objectives

inclusive growth, poverty
reduction
2. Understanding market systems
and how they affect the poor
3. Identifying constraints and
systemic change objectives
4. Temporary and catalytic market
development interventions
portfolio approach?
5. Monitoring, learning, feedback

Which poor? Which markets?

Producers, consumers, employees

Diagnostic process

Incentives
Capacity
Relationships

Using different tools

The poor and their context
Socio-economic
studies, census data,
poverty assessments,
livelihoods analysis,
investment climate
surveys,
competitiveness
analysis, drivers of
change
Access frontier, value chain
analysis, consumer research,
productivity studies, regulatory
reviews, organisational
appraisal tools, stakeholder
analysis, participatory tools

Symptoms

Specific market system

Systemic constraints

Intervention
focus

Causes

Focused interaction with

informants, interviews, focus
group discussions, brainstorming

M4P: delivering significant,

sustainable change

Financial services in South Africa

Vegetable value chain in Bangladesh

Coordination
Higher access: 39%
(8.8m) in 2002 60%
(19m) in 2007

Higher outputs and productivity amongst 1m

vegetable farmers

Systemic changes

Systemic changes

New commercial information source

Improved regulatory processes
Better coordination
Improved innovation processes

Better farming practices, resulting from ...

... Improved information flows through input
retailers
Training supplied by input suppliers
Changing the input supply business model

New M4P models

in Vietnam
Making carbon markets
work for the poor; smallscale infra services

Small wool farmers in S Africa

Improved access to services and
higher incomes for 5,000 farmers

Dairy sector in
Armenia
Doubling output, securing
market access, tripling
incomes for 2000 farmers

4. M4P issues
Improving usability: perceived complexity, lack of
instruments, linked or inter-locking markets
People, people, people: market for M4P services?
Political economy of multi-stakeholder approach
Measurement of systemic change in markets and
development impact
Time scales and capacity to spend
Over design under implement: donor incentives
Risk: Portfolio approach accountability and
flexibility, based on good M&E
M4P and the Grand Challenges

5. Next Steps?
Better knowledge management and learning from positive
experiences on the ground
Further refining the M4P approach, making it easier to understand
and more compelling
Sharper definition of core M4P products
Deeper integration of political economy approaches
Gaining more buy in from Governments, civil society and other
donors
Attracting more direct participation from the private sector
Building advocacy capacity and alliances with change agents
Better understanding of M4P impact and potential contributions to
growth strategies

Thank
You!