How to make markets work for the poor--and measure the results

Value Chains

How to make markets work for the poor--and measure the results

Development practitioners may be shifting away from traditional approaches to poverty relief to explore ways to make markets work better for the worst off. Photo: Cassandra Nelson/Mercy Corps.

Despite local demand for hay, Kenyan dairy farmers face milk shortages due to lack of quality supply. But instead of handing over the hay, why not bring the hay market to the farmers?

There is little hope of escaping poverty if markets don’t provide the poor with opportunities to increase their income through access to goods, services and employment opportunities. Making Markets Work for the Poor (M4P) is a facilitative approach to poverty reduction that seeks to understand where market systems are failing to benefit the poor, and how to take action to set them right.

Rather than having aid organizations supply hay directly to the Kenyan dairy farmers, a M4P project might support local cooperatives to meet their demand with quality supply, while establishing a local and sustainable market system.

But how do you measure the impact of M4P projects? The point was raised last week in an online forum hosted by the Guardian. Experts who joined the chat noted that one of the key challenges of the M4P approach has been finding metrics that can capture both the short- and long-term effects of these approaches.

“The impact chain of M4P programs is indirect, so it is much more difficult to measure these results,” said Nabanita Sen, from the Donor Committee for Enterprise Development (DCED).

Finding ways to better measure long-term, sustainable and transformational change is crucial for aid organizations looking to convey to their donors that these programs work.

But development practitioners believe there are ways to create a new measurement standard.

“There is a need to adopt a long-term vision, but M4P programs can show structural changes and trends toward long-lasting change in the first years of implementation,” said Luis E. Osorio-Cortes, an international market systems specialist at Practical Action Consulting.

“The problem is that many standard M&E [monitoring and evaluation] frameworks are still blind to those signals,” Osorio-Cortes added. “This must, and can, be improved.”

But traditional charitable approaches have dominated the development scene since its beginning, just after World War II, and largely shape today’s standard measurement framework.

Aid organizations traditionally count the number of vaccinations, food rations or emergency supplies distributed and share those counts and results with donors.

On the other hand, creating links between supply and demand for hay with a M4P approach produces a number of indirect effects that are harder to "count,” and donors accustomed to annual giving cycles may not have the patience to wait for long-term results.

For example, the hay cooperatives might open and expand operations, creating income and employment opportunities, and boost business for companies that provide farming machinery and production equipment. Quality hay is made accessible to farmers who can then feed their livestock, produce more milk and increase their incomes. The impact of these results can be easily miscalculated if it’s forced into the standard, short-term measurement framework.

Yet some of the leading development organizations are finding more efficient measurement strategies to fit these unconventional programs.

The Donor Committee for International Development has applied a monitoring and results measurement system to better capture the qualitative factors of systemic change. “We have developed measurements based on result chains to explain how activities will lead to different levels of long-term change,” Sen said.

The UK's Department for International Development (DFID) has taken a similar approach by designing a “value for money” framework (pdf) that will satisfy the needs of donors and provide qualitative measurements.

“We call it a ‘weightings and ratings’ approach,” said Julian Barr of DFID. “Its basis is to select key processes in the intervention, and develop specific criteria against which to rate the ‘quality’ of these processes. Different processes are weighted according to their importance in achieving outcomes and impact.”

What does that mean? In the case of the Kenyan hay market, it might mean project managers work to determine which interventions are most valuable in creating adequate supply, such as working with cooperatives to educate hay farmers on quality standards, and weight those more heavily than other activities in order to illustrate the project’s overall value to its donors.

Despite its challenges, the M4P approach has gained substantial traction in recent years as some of the largest aid organizations and businesses generate interest in market development strategies. And businesses have come to incorporate similar practices through social investment and fair trade, increasing engagement with the bottom of the pyramid as valued customers.

While capturing the full impact of these programs may prove a hefty challenge for aid organizations worldwide, it seems the opportunity to approach poverty alleviation from an entirely new angle may be enough to convince them to take on the task. And that's certainly something worth measuring.

Curated news and insights about innovative, market-driven solutions to poverty explored through news, commentary and discussion.

Learn more »

Global Envision newsletter