Market-oriented Approach: A Key Factor in Sustaining and Scaling Partnerships with the Private Sector

May 25, 2021

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Market strengthening

The first in a series of five blogs about the drivers of sustainability in USAID partnerships with the private sector based on the Enduring Results Study 3.0

USAID published the Enduring Results Study 3.0 (ERS 3.0) in fall of 2020 to illustrate how USAID’s private sector engagement activities can deliver market solutions with lasting impact. The study captures and offers evidence on the drivers of sustainability and scale in the Agency’s partnerships with the private sector after USAID funding ends. 

One of the findings in ERS 3.0 is that market-oriented partnershipsactivities designed to reduce barriers in existing markets and/or create or catalyze new markets — scaled more often without involvement from additional partners or donors compared with non-market-oriented approaches (in a limited sample of partnerships).  

Among the partnerships that sustained after two years post-USAID funding, 12 of the 17 market-oriented partnerships reviewed in ERS 3.0 were found to have scaled their outcomes/activities after USAID funding ended, as opposed to only six of the 11 partnerships that were not market-oriented.

USAID interviewed Kristin O’Planick, a Market Systems Specialist in the Bureau for Resilience and Food Security, for her insights on why market-oriented partnerships often led to more sustainable results.  

Market-oriented partnerships and a market systems approach

For more than ten years Kristin O’Planick has supported USAID Missions in strategy and project design, implementation, monitoring, and evaluation for market systems programs. 

A market system, as defined by USAID, is a dynamic space — incorporating resources, roles, relationships, rules, and results — in which private and public actors collaborate, coordinate, and compete for the production, distribution, and consumption of goods and services. A market system approach identifies weakness in the system and facilitates target interventions (e.g., market incentives) to improve system outcomes in support of competitiveness, inclusion, and resilience. 

“This has always been the premise behind a market systems approach — that by working through partners in a way that is aligned with their market incentives, co-developed solutions are more likely to sustain and scale beyond our engagement,” said O’Planick.

O’Planick gave an example of a market-oriented partnership from USAID in Bangladesh where their implementing partners worked with some local input suppliers to develop a business strategy around preferred distributors and retailers. Taking a new look at these dynamics helped those firms expand. These businesses, said O’Planick, “expanded beyond the parameters of the original partnership replicating the approach in additional business lines and expanding to additional districts.”

The USAID/Bangladesh example illustrates another ERS 3.0 finding: the majority of market-oriented partnerships in the study sample sustained by establishing or expanding market linkages and/or by enabling a new customer segment, market, or beneficiary population. Market linkages — the actors, channels, mechanisms, and transactions that facilitate the journey of a good from producer to consumer — create the opportunities to attract new customers as well as increase consumer’s access to buy goods and inputs. 

O’Planick says this finding resonates with many of the successful partnerships under the Feed the Future initiative.

“We did an ex-post study on the Zambia PROFIT activity and found that input suppliers, five years after the activity, continued to use, had expanded, and further adapted the rural agent model that was developed in partnership with the activity. This model allowed these local businesses to target smallholders who, in turn, had dramatically increased their use of improved agricultural inputs,” said O’Planick. 

Smallholder farmers, who produce a small amount of agricultural products on five hectares or fewer of arable land, are a growing target market for input suppliers and businesses that sell seed, fertilizer, machinery, and other “inputs” to improve crop production.

 “This success was influenced by dynamics in the market beyond the activity’s influence,” said O’Planick. “But that’s the idea, right? To have the ability to work with private sector partners to read those market signals and use opportunities presented to support development impact.”

How to realize a market opportunity

The study also found that including the private sector in the partnership design and implementation — how market-oriented partnerships are made — more often increased their adoption of activities and outcomes. 

“If we are bringing the buyer, the supplier, brokering the deal, and really driving the whole thing, it may work well as long as we are still at the table. But once we’re gone, those businesses haven’t really built their own relationship and may not be able to navigate shifts in the arrangement without us in that brokering role,” says O’Planick about Feed the Future partnerships. 

She relates that successful outcomes result when USAID brings partners together and sets the stage for them to do their own negotiating, rather than USAID doing it for them. 

“If we can play that supporting role in our partnerships, then it is more likely that once we leave the table, they will be able to use their relationship built over time to carry the business forward,” said O’Planick. 

Fostering inclusion as a market opportunity

The Enduring Results Study 3.0 reveals specific evidence on how private sector partnerships with USAID drive sustainable outcomes capable of scaling once USAID exits the activity. The findings support the importance of market systems development for sustainability in PSE, such as the recent Feed the Future Market Systems and Partnerships (MSP) award from Resilience for Food Security. This $65 million, flexible mechanism allows USAID Missions and Operating Units to efficiently access the expertise required to engage new private-sector partners. 

“Who is currently excluded that presents a market opportunity?” is the question O’Planick said USAID should be asking.

“We focus too much on what isn’t working in a market system and get bogged down in continuously fixing the next bottleneck. Rather, we should focus our efforts on fostering partnerships around opportunities that will better equip the private sector and other market actors to work together to solve their own problems,” she said.

Related definitions

Market-oriented approaches/activities/mechanisms: activities or mechanisms that contribute to development outcomes either by addressing barriers in existing markets or by creating/catalyzing new markets. These typically include but are not limited to buying, selling, or other profit-driven interactions, either at the partner or beneficiary levels, such as making connections between producers and buyers or between distributors
and end customers. Partnerships that leverage these approaches, activities, and/or mechanisms to aid development are called market-oriented partnerships.

Non-market-oriented approaches/activities/mechanisms: activities or mechanisms that result in development outcomes without relying on the market (e.g. communications campaign to fight trafficking of persons). Partnerships that leverage these approaches, activities, and /or mechanisms to aid development are called non-market-oriented partnerships.


 

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