Theory Of Change

PMSD Toolkit

In a nutshell: A theory of change (ToC) is a project level statement of the high-level links between project activities, market actor behaviour changes, market system changes and impacts on target groups. A theory of change should capture the team’s current thinking and assumptions on how change will happen so that they can be explored and rebutted if, and where, necessary. It changes the way of thinking about initiatives from ‘what you are doing’ to ‘what do you want to achieve’.

Status: Optional tool

Key principles: The theory of change for a PMSD project needs to be written to reflect the principles of systems thinking, and thus recognise the complexity of market systems. This requires that a ToC is presented as a broad overarching framework that doesn’t detail every specific activity and intervention. It should be reviewed regularly and updated to reflect up-to-date learning and any adaptations to project strategy.

Preconditions and preparation: A theory of change should be developed alongside the market analysis, as the assumptions and strategy should be based on sound research and field interactions. Research needs to include an understanding of the realities of poverty and the priorities of marginalised groups (see Marginalisation Analysis) as well as the current functions and dynamics of the market system and key actors (see Preliminary Market Mapping) including their incentives for change. This background research means that the ToC can include broad areas for potential intervention – based on a grounded view of what behaviour changes are desired and feasible, and how that might lead to wider systemic change.

There are numerous processes for developing a theory of change, but for market systems approaches like PMSD, the BEAM Exchange proposes six key steps in developing a ToC:

  • Define the poverty reduction goal;
  • Identify opportunities to benefit the target group;
  • Define how changing the market system will create these opportunities;
  • Set out assumptions and contextual factors;
  • Define areas for intervention; and
  • Identify indicators of change.


A theory of change is usually presented in a single document that includes:

  • (a) the long-term goal;
  • (b) the context;
  • (c) an explanation of the sequence of change expected to achieve that goal;
  • (d) the assumptions between each link in the sequence; and
  • (e) a conceptual diagram outlining the key links between program activities and impacts.

Figure: Potential Theory of Change structure

It is important to differentiate a high-level ToC (or its summary in a LogFrame) from the specifics of a Results Chain which goes into much more detail for a particular intervention. Theories of change give the broad lay of the land, but do not specify the detailed pathways for change. Results Chains do lay out detailed activities, highlighting who does what, and building out a detailed pathway to change.

Outcomes/behaviour changes

As an internal document, the ToC is meant to clarify the overarching strategy. It is often a key tool for aligning projects with donors. Its clearest link to behaviour change is by articulating the major changes in the market system that are required, which can then filter into the Facilitating Interventions use case, for targeting the support to key market actors.