3.4.8. Direct Intervention

Traditional enterprise development projects often take the route of direct intervention in response to value chain constraints. Either the development agency directly delivers the services that are required for MSE upgrading or they subsidize private-sector service providers to provide these services to MSEs. This kind of direct intervention by development agents is often not very successful and sustainable in the long run. The value chain approach maintains that facilitation instead of direct intervention is generally a better strategy in response to value chain constraints.

Why intervene directly in value chains? In many cases, private-sector players are absent or uninterested in intervening. To kick-start the process and show quick results, development groups may decide to intervene directly in the value chain.

When is direct intervention appropriate? Development groups should ideally play the role of the facilitators and rarely intervene directly. However, there may be exceptional scenarios that necessitate direct intervention by a development group:

  • Extremely weak markets
  • Very vulnerable populations or demographic groups
  • Absolute lack of incentives, resources or skills by value chain participants

How to directly intervene? In situations where direct intervention is warranted, care should be taken to adhere to the following principles:

  • Work with a local provider and build its capacity to deliver services independently in the future
  • Focus on cost recovery or fee-for-service from the beginning
  • Stagger the withdrawal from direct intervention

Exit strategy: An exit strategy should be an integral component of the project design process, rather than something that is developed towards the end of the project. To ensure sustainability of direct interventions, a phased exit strategy should be developed that gradually eliminates the need for the intervening agency and increases the need for local service providers.