Market Systems Development – How and Why
Market Systems Development – How and Why
Market Systems Development (MSD) is an approach to economic development that focuses on creating and strengthening market systems to increase economic growth, create jobs, and improve livelihoods. This approach differs from traditional development approaches in that it recognizes the importance of markets and the private sector in driving economic growth, rather than relying solely on aid and government interventions. Octopus Consulting and Insight has made Market Systems Development one of its areas of specialization, recognizing its transformative nature and sustainable impacts. This, when combined with our priority on entrepreneurship development, and youth and women’s economic empowerment, can lead to the innovative change that our world needs today.
Principles of Market Systems Development
The MSD approach is based on several key principles that differentiate it from traditional development approaches. These principles include:
- Systems thinking: MSD recognizes that markets are complex systems that are influenced by a range of factors, including policies, institutions, and social norms. By taking a systems approach, MSD practitioners seek to identify and address the underlying causes of market failures, rather than treating symptoms.
- Private sector-led: MSD recognizes the critical role that the private sector plays in driving economic growth. Rather than relying on aid or government intervention, MSD practitioners work with the private sector to identify and address market failures and improve the competitiveness of local firms.
- Adaptive and iterative: MSD recognizes that economic development is a complex and dynamic process. Rather than following a fixed plan, MSD practitioners work in an adaptive and iterative manner, continuously monitoring and adjusting their interventions based on feedback and learning.
Transporting harvested green bananas on a “Boda Boda” Uganda (Beat Roth, Pixabay)
Strategies for Market Systems Development
There are several strategies that we apply to create and strengthen market systems during the project design, evaluation, and learning phases. These strategies include:
- Facilitating market linkages: OCI works to connect producers with buyers and help them access new markets. This can include improving transportation infrastructure, facilitating trade relationships, and supporting value chain development.
- Improving access to finance: We work to improve access to finance for small and medium-sized enterprises (SMEs) and other market actors. This can include supporting the development of local financial institutions, promoting innovative financial products, and providing technical assistance to improve financial management.
- Strengthening institutions: OCI strengthens the institutions that underpin market systems, including regulatory bodies, trade associations, and industry groups. This can include providing technical assistance to improve governance and accountability, promoting legal and regulatory reforms, and supporting the development of standards and certification systems.
- Building human capital: MSD practitioners work to build the skills and knowledge of market actors, including producers, entrepreneurs, and service providers. This can include providing training and technical assistance, promoting entrepreneurship and innovation, and supporting the development of educational and vocational programs.
Impact of Market Systems Development
MSD has the potential to have a significant impact on economic development. By creating and strengthening market systems, MSD can increase economic growth, promote inclusive economic growth and job creation, and build resilience. This approach can increase economic growth by improving the competitiveness of local firms, strengthening intermediaries, and increasing market linkages. This has a proven impact on reducing poverty through employment, increased access to resources, and enhanced social cohesion. The nature of MSD is that it is inclusive, as a healthy market system understands the imperativeness of increasing involvement of vulnerable groups like women, youth, and rural populations.
Market in Gambia (Hella Nijssen, Pixabay)
“You can’t get sustainable development when half of the population doesn’t control their own assets. Women’s empowerment has to be at the forefront of any poverty eradication program” – Octopus Consulting and Insight Founding and Managing Partner, Bonaventure Fandohan (OUR WORLD, Rotary Magazine 2020).
Lastly, strong market systems are able to resist external shocks due to their diversification and competitiveness. They become capable of navigating the international market for importing and exporting goods with the ability to accommodate changes in consumer preferences and farming technologies.
The value of MSD cannot be overstated, because by targeting the real weaknesses in market systems and developing them (including the public sector, private sector, financial institutions, and other value chain actors) is a highly effective way to create economic development and long term sustainable transformation for impoverished communities.
Henson, A. (2020, September). Growing Local Economies: Women Lead the Way. Namaste Direct; Rotary International “Our World” Magazine, Sept. 2020 Edition. Retrieved March 25, 2023, from https://namastedirect.org/
BEAM Exchange. (n.d.). Market Systems Development. BEAM Exchange. Retrieved March 25, 2023, from https://beamexchange.org/market-systems/
Ghebru, H., Grant, W., & Smart, J. (2021). Design and Implementation of Impact Evaluation of Market Systems Development (MSD) Projects: The Case of InovAgro. International Food Policy Research Institute – IFPRI and Development Alternatives Incorporated- DAI. Retrieved from: https://beamexchange.org/uploads/filer_public/55/45/5545d6dd-c0c1-443f-9fc4-36212d7fb588/design_and_implementation_of_impact_evaluation_of_market_systems_development_msd_projects_-_the_case_of_inovagro.pdf.
Market systems and people in poverty – DCED. The Donor Committee for Enterprise Development. (n.d.). Retrieved March 23, 2023, from https://www.enterprise-development.org/implementing-psd/market-systems/