Scalability and Sustainability in Market Systems: Highlights from Cracking the Nut 2019

From October 14-15, Cracking the Nut 2019 brought together more than 150 individuals from the private sector, NGOs, and government to share ideas and dialogue on how to leverage systems for improved food security. This year’s conference—the 9th annual Cracking the Nut conference hosted by Connexus—was held in Dakar, Senegal. The conference theme was “Leveraging Systems for Improved Food Security” and kicked off with an engaging keynote from Larry Cooley, President Emeritus and Founder of MSI, on applying a systems approach to agricultural development. Cooley focused on scalability during his presentation. According to Cooley’s estimates, only 5% of “successful” projects will ever reach scale, and it will take 15 years for those projects to actually reach scale. You can see the challenge when you consider that the average project in our space is only five years in duration.

Cooley stressed that to be scalable you have to work with the local government and private sector, because they are the only actors with the infrastructure or capacity (through policy and incentives) that can help bring solutions to scale or to scale up.

Cooley suggested that we (donors and NGOs) should focus on intermediation, which is the missing component between innovation and delivery at scale (see image below). Later discussions during and between sessions noted the importance of facilitation over direct implementation and the trend in programming toward donor projects taking a facilitative role with actors in the system rather than taking a direct role in service delivery. USAID’s more recent policies (the new USAID Policy Framework and the Private Sector Engagement Policy) indicate that the Agency is serious about adopting this type of approach. These are promising steps toward a more country-led development approach that should yield locally-sustainable results.

In fact, Cooley argued that if a solution isn’t scalable then it’s likely not sustainable either. These two concepts go hand-in-hand. We should therefore think about potential scalability of a program from the start, meaning that we should take care not to over-complicate programs. By reducing complexity, we thereby increase the potential for scalability of successful programs. His advice is that if you can reduce the complexity in a project by 50 percent and only lose 30 percent of its effectiveness, then that’s a good trade-off. You can read more about how to design programs for scale in the Scaling Up Sourcebook.

Cooley’s presentation challenged us to think about how our work and programs can be more scalable and sustainable. This idea of scalability and sustainability became a question frequently asked of presenters during the Q&A at the end of breakout sessions.

The breakout sessions were organized around three topics: Reducing systemic risks; improving nutrition, health, and access to clean water; and increasing inclusion in commercial markets. Several underlying themes emerged during the breakout sessions I attended, which I have outlined below.

Inclusion of women, youth, and persons with disabilities

There were many examples of programs shared by NGOs where deliberate inclusion of women, youth and persons with disabilities (PWD) led to successful outcomes. The USAID/Rwanda Private Sector Driven Agricultural Growth Project (PSDAG) utilized a creative Value Chain Competitiveness Fund (VCCF) to encourage small and medium-sized enterprises (SMEs) to build women, youth and/or PWD into their business plans. Those SMEs that had a gender or social inclusion component to their business plans received additional points in the scoring. One successful grant recipient was able to grow their business for the export market and recently signed a $500 million export contract. In Uganda, the Feed the Future Livelihoods and Enterprises for Agricultural Development (LEAD) program and the Feed the Future Uganda Agricultural Inputs Activity successfully engaged youth as village agents and professional spray service providers, and empowered women agro-dealers. In Nigeria, the USAID Maximizing Agricultural Revenue and Key Enterprises in Targeted Sites II (MARKETS II) project required that 50 percent of participants were women and 30 percent of participants were youth. They were able to achieve this level of inclusion by reducing the landholding requirement from 1-5 hectares to less than 1 hectare. An ex-post study of the project assessed post-project sustainability and outlined key results, including MARKETS II farmers’ food security improvements being significantly higher (about double) those of non-MARKETS II farmers. Learn more about the USAID MARKETS II project in this Chemonics video. Another interesting example of inclusive programming came from Rikolto, a Belgian development organization that is using the LINK methodology developed by The International Center for Tropical Agriculture (CIAT) to identify and define whether a business is truly inclusive. This enables Rikolto to determine whether to partner with that business to bring urban consumers nutritious food sourced from smallholder producers.

Technology and innovation to reduce risk

I also heard about exciting new technological innovations that are being employed in many projects to reduce risk. In Mali, through SNV's Sustainable Technology Adaptation for Mali’s Pastoralists project (STAMP+) the Garbal information service utilizes satellite data to help pastoralists in the Sahel find viable grazing lands more easily—a critical need in an environment more and more affected by climate change. In Kenya, the World Council of Credit Unions (WOCCU) is utilizing the smartfarm and smartrisk apps developed by CropIn, an Indian technology firm, to reduce lending risk to smallholder farmers through better monitoring. Ignitia is a tropical weather forecasting company that is bringing mobile weather forecasting to West African farmers through SMS. Farmers can use Ignitia’s location-customized forecasts to determine the timing of planting, application of agrochemicals, and harvesting. These innovative technology solutions are contributing to reduced risk for smallholder farmers across Africa and helping to increase productivity and food security as a result.

Engagement with the private sector

Another theme that emerged in many breakout sessions was the importance of engaging with the private sector. Cooley’s keynote remarks also touched on the critical role the private sector can play in scaling innovations. A plenary discussion on public, private, and civil society roles in improving food security highlighted a Senegalese firm, Le Lionceau, that is working to fill the void for nutritious infant food in the local market. The previously mentioned USAID/Rwanda PSDAG project worked to increase private sector investment in agricultural value chains, resulting in $27 million in new private investment and $70 million in domestic and export sales of agricultural commodities by private sector partners in Rwanda. And Rikolto is developing inclusive partnerships with the private sector to connect smallholder producers with urban markets.

Financing approaches to reduce risk

Breakout sessions also featured a number of financing approaches designed to reduce risk to lenders and borrowers. Smallholder farmers and small-scale producers are frequently excluded from formal financing because they are considered too risky. WOCCU shared their innovative lending toolkit which helps to reduce initial risk and open up financing to smallholder farmers that were previously unable to access finance. The use of the smarfarm and smartrisk apps by WOCCU and partners in Kenya is also helping to lower risk.

During a lively session on blended financing, we heard from Tanager and AV Ventures, both implementing market systems development projects with a blended financing model to buy down risk and engage private sector investment. The Bill & Melinda Gates Foundation-funded SELEVER project in Burkina Faso uses guarantee facilities for private microfinance institutions to facilitate lending to women micro-entrepreneurs. In Ghana, AV Ventures created and managed a blended finance fund with capital from the United States Department of Agriculture (USDA) and the Overseas Private Investment Corporation (OPIC) for long-term investment in agribusiness-SMEs working with the USDA Ghana Poultry Project. Both projects have impressive repayment rates -near 98 percent!

All the sessions I attended pointed to one overarching theme: Progress in market systems development is contributing to increased productivity and improved food security in vulnerable populations. It was encouraging to see and hear so many positive examples of progress in making lasting impacts on market systems and food security at Cracking the Nut 2019. Visit Cracking the Nut online for more resources from the conference.