Markets can be a powerful way to get services and products to consumers and to give producers and workers access to income earning opportunities. They are not always efficient, equitable or inclusive however, especially in contexts where poverty is acute. The causes of inefficiency, inequity and marginalisation in markets are many and some of them are widely accepted. For example:

• Blockages in the flows of market information and other types of knowledge (e.g. illiteracy and lack of communications infrastructure);
• Weakness of public institutions dedicated to the promotion of trade, rural development, agricultural research, education and law enforcement;
• Policies, social norms, and legal frameworks that are not equitable and fail to promote investment, transparency, competition and the sustainable use of natural resources. Instead they often lead to excessive concentration of power and influence in the hands of a few actors and encourage unsustainable use of finite resources.

Typically small-scale producers find their participation in markets characterised by:

• A lack of resources to meet quality and quantity requirements, and to adapt to changing conditions;
• High transaction costs – increased costs that small (and often scattered or remote) businesses face in getting the inputs and services they need, negotiating deals and enforcing contracts;
• High Risks  – lack of control of terms and conditions of purchase or of quantities and quality of inputs that are delivered to them;
• Lack of market literacy and experience – small-scale producers tend to have limited understanding of how to exploit opportunities and deal with the challenges that the market throws their way.

What is needed to make markets work for the poor?Markets have the potential to connect marginalised producers to a broad network and give them access to valuable commercial and social relations, technologies, experiences and assets that can help them escape poverty.

A market that works for the poor involves:

• Overcoming exclusion and improved access for small-scale producers;
• Greater affordability of inputs, services and other products that poor people buy;
• Greater earnings for producers and workers;
• Greater opportunities and more choice for market actors;
• Reduced risk;
• Greater influence on policy and other big issues.

Instead of taking an extreme approach such as all-out trade liberalisation or heavy-handed direct intervention, a more holistic approach is needed to transform market systems, one that makes market systems work better for the poor and that improves their competitiveness, linkages, collaboration, access to inputs and services and enabling environment.