3.4.9. Recommended Good Practices for Design and Implementation

Focus on a long-term industry vision and maintain a systemic perspective: End goals and a long-term vision for the industry should guide the design and implementation of value chain development projects. Results in the short term are very important for building trust and instilling confidence amongst stakeholders, but a project design that does not keep in mind longer-term objectives is unlikely to see the desired results from its interventions. Rather than benefiting a few MSEs directly, the industry vision should be developed with a broader perspective in mind, and should attempt to bring about systemic changes in the value chain. MSEs do not operate in isolation, and the competitiveness of the entire value chain is more important in the long run than short-term benefits to a few MSEs. Most development interventions directly target MSEs but, in many cases, interventions targeted elsewhere in the value chain may have a much greater and more sustainable impact on small firms.

The Swiss Agency for Development and Cooperation's Sustainable Agriculture Support project in Albania ^[1] aimed to catalyze long-term systemic change by helping to develop a functioning market for organic products. While farmers did not directly benefit from the project through subsidies or handouts, the overall situation improved for a large number of smallholder farmers and their families who received higher prices for their agricultural produce, gained an incentive to protect the environment, and subsequently experienced health benefits. In another example, the Agriculture Accion contra el Hambre Sissian project in Armenia focused on direct procurement and delivery to build income-earning assets for self-selected poor groups in a number of villages across the region. ^[2]. Overtime the project has started to consider these groups in a wider market context and is now engaged in interventions with partners supplying inputs to producer groups (backward linkages) or procuring outputs (forward linkages) from producer groups.

Engage multiple stakeholders, but clearly define roles: Projects often have multiple stakeholders--with their various incentives, skills and resources--engaged in the process of making the value chain more competitive. Areas of overlap and a lack of clear consensus about the respective roles and responsibilities of the different stakeholders can lead to confusion, conflict and wasted resources. As roles evolve during implementation, facilitators should help project partners define and clarify their responsibilities.

DAI's Micro-, Small and Medium-sized Enterprise (MSME) Strengthening project in Cambodia ^[3] assisted rural MSMEs in the pig and fish value chains to improve opportunities and increase incomes by working in partnership with other stakeholders to promote new ways of thinking and operating. The project facilitated increased trust and cooperation, networking, information sharing and the pooling of resources in ways that benefited all firms in the value chains. The project worked directly with input suppliers and veterinarians, who then trained MSMEs within their sectors.

Increase the breath and depth of benefits to value chain participants: Increasing the flow of benefits to MSEs as a result of their upgrading is often the reason for donor support to value chain interventions, but these benefits may be short lived if other value chain participants are not rewarded commensurately. Conversely, there may be a skewed distribution of benefits with only those closest to the end markets really profiting. Facilitators therefore need to carefully assess the distribution of benefits throughout the value chain to ensure adequate returns to all participants, especially MSEs.

Avoid redundancy: Donor-funded interventions can distort markets if they are not structured carefully. Often, project interventions duplicate the work already being done, or being planned, by other players. Facilitators should analyze each activity for potential redundancy and should refrain from implementing a particular activity if they feel it is going to happen anyway, is already happening, or may lead to market distortions that hamper the private sector's ability to perform the activity in the future.

Sequence interventions appropriately: Appropriate sequencing of interventions and identification of pre-requisites to activities is another issue that facilitators should analyze during the design phase. Depending on the specific contexts, certain things need to happen first, in the absence of which, interventions will not have the desired affect.

The Katalyst^[4] project in Bangladesh approached the pond fish sector armed with a thorough understanding of the sector, but rather than designing a fixed set of project activities, Katalyst decided to let the pace and order of interventions be guided by the dynamics of the sector itself. The first intervention, facilitating the emergence of a fingerling market, implemented in collaboration with Faridpur Fisheries Association (FFA), was at the top of the market players’ agenda. Compared with conventional direct fingerling supply from nurseries or hawkers, a market could offer better quality, more variety and lower prices. After one year of working with FFA it became become clear that its organizational capacity needed to be enhanced. Katalyst had also become aware that FFA’s focus was primarily in one district, and that other (weaker) associations were active elsewhere in Faridpur. These realizations led to a second set of interventions which aimed at building the capacity of FFA and bringing three other associations into the project. Overall, the sequence and flow of Katalyst’s interventions clearly emerged from its interaction with market players. Interventions not only had to address the key constraints of the sector as prioritized by Katalyst but had also to match the capacities, incentives and priorities of its partners.

Ensure sustainability and develop a clear exit strategy: There are two types of sustainability that facilitators should address:

The sustainability of an intervention or activity--MSEs should continue to receive a particular service long after the donor has withdrawn its support from the value chain. This will only happen if delivery of the service is commercially sustainable.
The sustainability of the development process--beyond facilitating specific transactions, project implementers should build the capacity of value chain actors to identify solutions to value chain constraints on their own without external support.

Facilitators should develop a clear exit strategy during the project design stage that is time-bound (defines clearly when the facilitator will exit), builds local capacity (so that a void is not created when the facilitators leave), and leaves in place commercial inventives (so that the sustainability of transactions and activities is ensured after the project ends).

In Africa, market information systems have tended to thrive while supported by donor projects, only to fade away when the donors leave. The International Labour Organisation’s FIT Uganda program^[5], on the other hand, offered a potential solution to this sustainability problem by highlighting the commercial potential of FM radio programming. FIT showed that radio stations can become both the collectors and disseminators of market information that are reinforced by, but not dependent on, the local and national government information services that have proven to be so difficult to sustain in the past. Not only are the programs that have been supported by FIT proving to be sustainable without public or donor support, but they are being copied and replicated within the industry. The interventions therefore produced impact at the wider industry level and not just at the level of the radio stations directly supported.

Build flexibility into the program: Market conditions and the contexts in which MSEs operate in a value chain are very dynamic and facilitators need enough flexibility in their program to adapt to these changes. Facilitators need to be open to continual learning, and should employ an "action-learning" strategy that reflects upon lessons being learned and incorporates these lessons into the ongoing process of project implementation.

Assess resources and consider the scale of impact: Donor resources are always limited and their strategic and optimal allocation is of vital importance to a project’s success. Facilitators should conduct an intensive and realistic assessment of the resources at their disposal and should analyze expected impact in relation to the investment needed in order to make optimal use of the resources. Scale of impact, in terms of the number of MSEs benefited as well as the spread and continuity of benefits to MSEs, should be an important consideration for facilitators and donors. Rather than focusing on short-term immediate impact, facilitators should assess the expected scale of impact of their interventions over the longer term. Replication is an important means to reach scale, but industry-wide change is perhaps a better instrument to achieve greater scale.

Leverage private sector resources: Resource leveraging and cost sharing should be key principles of a value chain project. Intervention transaction costs should be borne by the private sector and facilitators should ideally support capacity building activities. Analysis of incentives can reveal those lead firms in the industry which may be willing to invest in industry upgrading that increases the benefits to MSEs.

The USAID-funded Chiapas coffee project^[6] in Mexico was implemented by Conservation international with Starbucks as the lead firm. Starbucks was the coffee leader with capital, skills, incentives and commitment to invest in upgrading value chains that incorporate large numbers of smallholder producers. Private-sector market leaders are more likely to invest in upgrading a value chain incorporating large numbers of small firms when they are able to maintain some level of exclusivity in the market channel and a share of the consequent premiums. In this case, this was achieved by establishing a unique brand (Shade Grown Mexico).

Integrate cross-cutting themes: Value chains operate within broader systems, and it is critical to understand and address factors in those systems such as environmental sustainability, health and nutrition, gender, and youth. These considerations should be part of the up-front analysis as well as a project's long-term plan.

Footnotes

↑ Sustainable Agriculture Support in Albania (SASA) Project
↑ A Common Framework for learning and managing change-Experience from SDC Regional Programs in the Balkans and South Caucasus, Elliott, David; 2006
↑ Cambodia MSME Project: Final Monitoring and Evaluation Report
↑ Accelerating Growth in the Pond Fish Sector: Interventions to bring about sustainable change, de Wildt, Marieke de Ruyter; Case Study Number 4 . Katalyst, Bangladesh; 2007.
↑ 2007 Making Markets Work for the Poor Case Studies Series : Expanding the poor’s access to business information and voice through FM radio in Uganda, SDC, Bern; 2007.
↑ Sustainable Coffee: Increasing Income of Small-Scale Coffee Farmers in Mexico through Upgrading and Improved Transparency in the Value Chain