Mapping the Market

A framework for rural enterprise development policy and practice

Markets matter to the rural poor.  It is increasingly clear that in tackling rural poverty, market-related issues -  including access to information, institutions, linkages and trade rules - are vital considerations.  Failure to address these issues means that the benefits of other developments threaten to by-pass the rural poor.

In the complex contexts of rural poverty, the sometimes bewildered practitioner or policy-maker is proffered a range of solutions or policy prescriptions including: trade liberalisation; more productive agriculture; more effective support services and resources; better local governance; collective action and collaboration by producers; greater public investment in infrastructure; a more attractive investment climate and business environment.

The problem is that, with limited resources, it is rarely practicable to address all such factors simultaneously across the whole economy.  This paper will argue that efforts to secure or improve the income of poor rural producers and workers are best pursued through concentrating on the improved overall performance of specific economic channels or market-chains.

Surprisingly there is often little emphasis on market systems and their roles in poverty reduction within the conceptualisation and application of livelihood frameworks, or in professional fields such as agricultural research that seek to promote rural development.  The aim of this paper is to help address this deficiency, and in particular to provide a framework for encouraging an outlook which we call 'market-literacy'.


Executive summary

The Market Map framework

The Market Map framework is intended to serve two purposes.

  1. For the policy maker and rural development planner, it is a conceptual framework for thinking about the commercial and institutional environment in which small-scale producers (including smallholder farmers) operate. 
  2. For the practitioner, it is a practical and potentially a participatory tool, that can be used to represent and communicate knowledge about specific producers, their market-chains, institutional environments and service needs.

Processes of elaborating the Market Map, if conducted in a participatory way, can also be important interventions in themselves - directly improving linkages and relationships between market-chain actors, and preparing the ground for introducing or generating innovation in products, processes and market access.

The Market Map is made up of three inter-linked components.

  • Market chain actors and their linkages
  • Enabling business environment factors
  • Business and extension service providers

The central component maps the economic actors who actually own and transact a particular product as it moves through the market-chain from primary producer to final consumer  By better understanding the contribution each actor in the chain brings to the product, the aim is to identify inefficiencies, inequities and losses which could be remedied, or added-value which could be captured by poor producers particularly.  While many market-chains are characterised by inequitable relationships between actors, a clear objective of the Market Map approach is to help stakeholders realise mutual benefits by improving the 'systemic efficiency' of the chain.  Key to this is helping stakeholders become more aware of functions and processes along the chain that are needed to satisfy more lucrative or reliable markets.

The second component of the Market Map is a charting of the critical factors and trends that are shaping the market-chain environment and operating conditions, but may be amenable to change.  These 'enabling business environment' factors are generated by structures and institutions that are beyond the immediate direct control of economic actors in the market-chain. The purpose of charting this business environment is to understand the trends that are affecting the entire market-chain, and examine the powers and interests that are driving change.  This knowledge can help determine avenues and opportunities for realistic action, lobbying and policy entrepreneurship.

The third component of the Market Map framework is concerned with mapping these services that support, or could potentially support, the market-chain's overall efficiency.  The range of services that can potentially add value is huge and include: input supplies; market information; financial services;  transport services; quality assurance - monitoring and accreditation; technical expertise and business advice; veterinary services; support for product development and diversification.  Mapping 'services ' involves identifying particular service needs and their locations within the market-chain in order to get an overall picture of the opportunities for using services to improve market-chain efficiency or equity.  This mapping is a precursor to subsequently assessing the most appropriate mechanisms for delivery of services, in terms of outreach, sustainability and cost-effectiveness.

Channels of market demand for output from small-scale producers

The Market Map in its entirety has proved to be a very useful way to visually represent and succinctly communicate knowledge about specific market-chains' actors, operations, contexts and needs to different stakeholders.

Participatory market system analysis

Participatory approaches to market system analysis contribute to Market Maps that are more likely to be accurate and to represent a wider range of knowledge.  More importantly, the participation provokes interest and builds trust.  Ultimately it can facilitate the collaboration that is necessary for improving linkages and efficiencies within the market system, for effective lobbying on enabling environment issues and for coordinating collective action around services.

For participation to be effective a three stage procedure is helpful:

  1. Preliminary mapping: in which an outline Market Map is produced by a facilitating agency, using information gathered from key informants or an 'interest group' of stakeholders 
  2. Participatory market system analysis: in which specific actors in the market system itself are brought together to elaborate the Market Map, explore key issues in detail and build relationships
  3. Moving from analysis to action: in which the relationships, knowledge and trust generated above is used to effect changes in the business environment and access to services.

In preliminary mapping, the most important aspects are managing immediate expectations of stakeholders and establishing mechanisms for working with market system actors.  The formation of interest groups has been an important tactic for engaging those with a stake in market system performance e.g., as service providers, or with influence in shaping the business environment.

Participatory market system analysis (PMSA; formerly known as PMCA) is a key approach to operationalising the Market Map framework - converting an otherwise abstract framework into a practical tool which can facilitate efficiency, improve co-ordination, stimulate innovation and bolster trust within the market-chain.  Finding a 'hook' to engage commercial actors is critical. The preliminary Market Map can help facilitators identify very specific issues common to all market actors, and turn these into an 'offer' that will draw actors into the process.  Actual and perceived imbalances of power within the market system can however impede participatory analysis.  Building up trust is therefore important to facilitate open sharing of information, and reduce transaction costs.   One solution is for facilitators to orientate weaker participants in advance, so they understand their role in these events, and have realistic expectations of PMSA process outcomes.

To a limited extent, PMSA processes can be an end in their own right: justified simply in terms of establishing linkages, improving co-ordination and bolstering trust among the market system actors themselves.   However, more significant improvements in market system performance stem from a more enabling business environment or from better access and use of business and extension services by these actors.  Achieving these wider changes requires longer-term interventions for which PMSA is a starting point.

Tackling constraints and bringing about systemic changes in particular markets, may require facilitating agencies to adopt strategies that target decision-makers with influence at local, national, and in some cases, international levels.  The Market Map can help provide a basis for common understanding and action; and PMSA processes can encourage more powerful actors in the market system to engage with issues that negatively impact on weaker players. PMSA processes can also initiate formation of groups or associations that represent and articulate more coherently the collective issues facing weaker actors in the market system.

PMSA processes are also about diagnosing problems in access to specific services.  They can contribute valuably to accurate information about the shape of demand, particularly where there is a high incidence of less visible embedded service provision.   By kick-starting enhanced coordination, PMSA can also help aggregate demand from many small producers for specific services.  Producer organisations with effective organisational and negotiating capabilities have an important role to play in enabling such coordination.  This makes service provision more commercially viable, and thus encourages better supply.

Implications for development agencies

Organisations with a strong poverty-focus are used to focusing on the most immediate needs of poor communities.  They often 'out- source' market analysis and more commercial aspects of project planning and implementation.  This tendency should be challenged.  Effective PMSA requires the sort of participatory and facilitatory skills that many community-development practitioners have well honed, albeit in a different context.  Unlike business consultants accustomed to problem solving on behalf of their clients, such staff are more comfortable with the premise that participants themselves can most appropriately develop solutions and innovations.

Naturally, community-development practitioners may also lack confidence dealing with more commercial players.  The Market Map framework and PMSA approaches do need adequate investment in re-orientating staff skills towards a more systemic market-literate perspective.  However by employing the tools and strategies described here, misconceptions about markets can be overcome, and the confidence in what they have to offer and positive relationships can be built incrementally.

Conclusions

The fortunes of poor rural producers and other economic actors in market systems, are bound up with the capability of the market to respond systemically in a pro-active manner to changes in the competitive environment and emerging market signals.  Successful market systems that sustain, grow and generate income for producers will be ones that find effective mechanisms for:

  • Investing in market intelligence capabilities
  • Collaborating in production, marketing and procurement of inputs and services
  • Influencing the agencies that provide support services and infrastructure, or that can improve the business environment

In this context, policies based on general analysis of the business environment and investment climate may be insufficient to stimulate pro-poor growth.  Focussed analysis is necessary to understand the specific constraints in channels that are both important in the livelihoods of the poor, and have realistic prospects for sustainable economic growth.  Donors, governments and other development agencies seeking to tackle rural poverty need to acquire and promote 'market-literacy': knowledge and understanding of the institutions, competencies and relationships that make market systems work for poor rural producers in specific channels.

The implications can be considered at two levels: the strategies and operational structures of rural development agencies such as agricultural research institutions, government departments and NGOs; and the broad agricultural and rural development policies, and operational approaches, of multinational agencies and national ministries.

A market-literate approach requires institutionalising a new way of thinking. Many agencies with rural development objectives are shifting from a agricultural production focus to a market focus and this requires a new set of priorities. This change needs to be reflected in allocation of resources.  Equipping staff to adapt to a market orientation is a process that will take time and needs a commitment at all levels of an organisation. Priorities include:

  • Adopt a systemic framework and approach
  • Use participatory techniques 
  • Invest in market-literacy: orientation, skills and learning
  • Use influence to communicate issues to macro-level decision-makers

Donors and national policy-makers need to emphasise 'market-literacy' in rural poverty-reduction policy: - making market analysis a prerequisite for rural development programme design (so that the such analyses become as common-place as environmental and social impact assessments). This implies a shift in thinking in rural development more broadly, including agricultural research for example, that is similar to that achieved in the enterprise development field of BDS in recent years

Donors also need to invest in processes of analysis and capacity building. Embedding a market-literate approach in rural development programmes, requires investment and allocation of resources to develop the necessary skills and orientation.  Market literacy requires that different players in market systems know their respective roles and commit themselves to undertaking these effectively.  Joined up working and consistency of approach is important.  Investment in the analytical stage and in PMSA is important in enabling subsequent interventions to be more strategic and targeted. Donor should encourage, rather than discourage, programmes which plan for and invest in this type of analysis.

Note: in some cases you will find the term PMCA; however, we replaced it with PMSA to reflect our awareness about the importance of analysing the whole market system, not just the market chains.  Despite this change, the key lessons and insights remain the same.

Practical Action's work to develop markets for poor people is profiled in the 2006 ILO Reader "Implementing Sustainable Private Sector Development: Striving for Tangible Results for the Poor". This document is a key resource for donors, practitioners and researchers involved in developing markets with and for the poor. It highlights trends in the field and showcases innovative intervention strategies and approaches. In chapter 3 the Reader examines a market systems approach to poverty eradication "Developing a market system that reduces poverty entails stimulating processes that generate momentum by continuously expanding , learning and incorporating more poor people into market relationships that offer better and more secure returns". Example 17 shows Practical Action's Market Mapping, using a case from Kenya. It explains how participatory mapping of the market system helped stakeholders communicate opportunities and blockages.

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