‘Making Markets Work for the Poor’ (M4P) is an approach to developing market systems so that they function more effectively, sustainably and beneficially for poor people, building their capacities and offering them the opportunity to enhance their lives.
The central features of a market systems approach are built around analysis and action:
- Understanding the structures, rules and incentives around which the central ‘supply and demand’ core of a market works – and the main reasons (constraints) preventing it from working better for the poor
- Unblocking the constraints through improving wider systems (in this case: information, rules, access to services) that influence the core, so that the market works better, matching demand and supply
- Placing emphasis on learning, monitoring and evaluation, to inform further change.
A market systems approach is grounded on principles of ‘do no harm’ and sustainability. Every proposed intervention considers what impacts – negative and positive – it will likely have and ensures sustainability by asking the key questions of “who does?” and “who pays?” What a market systems approach does not do is provide short term fixes in the form of funds, goods and services that may undermine market systems and do long term damage.
Why a market systems approach?
In 2011, DFID Nigeria identified the need to intervene in the Lagos private education context and commissioned a scoping study which recommended that any intervention should follow an M4P approach.
This approach was selected on for two reasons: first, M4P-based projects funded by DFID are generating significant evidence of success. For example:
(1) In Nigeria, the PrOpCom programme, after an initial period following a different course, changed to a market systems approach, reaching 1.26m poor people, generating additional net income of £41m, and creating over 17,000 jobs. According to the project report, “only once PrOpCom started to adopt a rigorous M4P methodology did its effectiveness start to increase”.
(2) In South Africa, the FinMark Trust contributed to a 7.1m increase (doubling) in the banked population, working with banks, government, and specialised service providers.
(3) In Bangladesh, the DFID-supported Katalyst project has worked with more than fifty companies, government and other organisations. It has generated 183,000 jobs and $115m in additional income and impacted positively on 1.6m small and medium-sized enterprises (SMEs) and farmers.
Secondly, it makes sense for the Lagos private education market – which has over 15,000 schools. With the emergence of these schools, the ‘rules of the game’ have fundamentally changed. Education can no longer be seen as a public good delivered by the public sector, but rather as a complex pluralist system. In this context, standard development responses will not be appropriate. Thus, a market systems approach was a logical choice.