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Promoting Systemic Change in Shallow Markets

This post highlights a resource from the Market Development Facility (MDF), funded by the Australian Department of Foreign Affairs and Trade. This resource explores the characteristics and implications of shallow markets and provides context to better understand systemic change. 

Download and read the full report and check out the Introduction below. 

Introduction 

What does the classic example of systemic change in Market Systems Development (MSD) look like? A single innovation, such as a business offering a new product for poor producers, gains traction. Sales pick up. Other businesses copy the innovation. Then, other market actors respond with supporting innovations such as related products and services or supportive regulations. This classic sequence of events is unique, however, to relatively robust markets – large markets with strong information flows, the existence of support functions, and rules and norms that do not actively inhibit market growth. These are the types of markets that MSD started in around 15 years ago, such as some of the agricultural markets in Bangladesh and Kenya. MSD has proven useful for increasing inclusion and promoting growth in these relatively robust markets.

Programs are now applying MSD in many different types of markets – including markets with very different characteristics. Many of these markets are shallow. They may be small, have a lack of support functions or weak information flows, for example. Even in countries with relatively more robust economies, MSD programs often choose to work in emerging sectors with growth potential because these sectors have less entrenched interests and more opportunities to encourage pro-poor and inclusive incentives as markets grow. These emerging sectors are typically shallow because they are young or have not yet connected with more robust parts of the economy. Programs are finding that MSD is also useful in shallow markets to promote growth and ensure inclusion as markets grow. However, the trajectory of systemic change is different in these markets than the classic sequence. Therefore, the approach to encouraging it, monitoring it, and using information to further encourage it must also be different.

This paper explores how systemic change happens in shallow markets and the implications for MSD practitioners. It uses examples from the Market Development Facility (MDF), an MSD program currently being implemented in five countries. The examples are drawn from three of these countries: Fiji, Timor-Leste, and Pakistan, where MDF has been operating for more than four years. The paper is intended to encourage discussion and innovation in the MSD community on how to better promote systemic change in shallow markets.