Shifting to Market System Facilitation Approaches

USAID's shift to a market systems facilitation approach has been a slow evolution. More than a decade ago, we adopted the value chain as an analytical framework. But realistically, addressing a value chain in isolation may not reach the root causes of system behavior. Enter the market system as a new analytical framework. Today, many USAID activities are using this approach, but facilitation is the hardest part of this shift. It will be a long while before all of USAID's programs are implemented through systems facilitation approaches. But we have a growing group committed to this as our way forward. Related, USAID recognizes that collaboration, learning, and adapting (CLA) is essential to effective development at all levels. A recent discussion paper from USAID leverages examples from multiple sectors where facilitation approaches have been implemented in order to further discussion and refine what facilitation means.

The case for shifting to a market systems approach

So why make this shift to market systems, facilitation, and CLA? Facilitating a system inherently requires partnership and collaboration with local actors such that they catalyze change at key leverage points in that system. This builds in local ownership from the start and supports USAID Forward's emphasis on partnerships and local systems, which in turn supports our international commitments to aid effectiveness.

Additionally, because markets are human systems, they are complex adaptive systems. This means we can’t predict answers in advance because they tend to be highly contextually specific. Facilitation and CLA in tandem allow us to try things, see what effect they have on the system, and adjust until we see good development outcomes. By facilitating change in the market that enables that change to continue to evolve and grow, it achieves the level of scale that is feasible for that system. All these things taken together give us the development holy grail - sustainability. This is important because when this works well, it means that the development outcomes (rather than activities) as produced by the actual market system (rather than a parallel system created by donors) have lasting impact and can continue to evolve and improve over time on their own.

Practical operational implications

No strategic change comes without operational implications. At USAID, we have had to rethink our analytics and project design, but that is the easy part. There is a huge learning curve for how to do these things on the ground.

• Staffing: A critical constraint is the very small group of project directors and even smaller group of project staff who have experience with these systems facilitation approaches. A Ugandan staff member said that after 20 years using the same approaches, she's had to relearn everything for facilitation. Unfortunately, it can be hard to justify the cost of teaching staff, who were presumably hired because they knew what they were doing, how to do their jobs in a different way. There is still an assumption that a team can just analyze the system, identify a constraint, and fix it. But if you are truly facilitating, you will likely learn that your system analysis missed certain dynamics, that existing incentives block your technical solution, that the evident constraint is really a symptom of another problem that didn't seem to be the bottleneck, etc. Properly equipping our teams to use this approach matters, in terms of both knowledge and tools. Some things implementers can only learn by doing, but that learning needs to be shared.
• Relationships: As donors we need to reorient our relationships with our implementers. While we still need accountability and oversight, these approaches require donors to create room for risk-taking. We need to think about making our contracts more flexible, nurturing open and supportive relationships with our partners, and being an active contributor to the CLA process. We need to stand up to the pressure for quick, but meaningless results and tell a better story to our own funders and partner country governments about why this matters. With facilitation, it can be slower to get numbers, but then they grow quickly in the out-years and are more likely to sustain due to the way they have been achieved.
• Monitoring and Evaluation: This is a fraught issue that needs resolved (read this, this, this, this). Very smart people are chipping away at it, and there are promising things out there (see here, here, here, here). Keep sharing and we'll get to a collective solution.
• Coordination: Without broader coordination, the benefits of market facilitation are easily destroyed. Other projects, NGOs, or donors can create disincentives for the system change you are promoting, for example, by handing out free things. All the development players in a particular space need to understand the facilitation partner's methods, and if there are multiple facilitators, they must collaborate on how each will work with different aspects of the system. USAID's mission in Uganda has diligently done this with four facilitation activities in their Feed the Future portfolio. All related implementing partners have been educated on the approach so that they don't inadvertently conflict, and the four have highly collaborative processes. The harder part is getting all the other donors in the sector to create space for this approach among their respective implementers.

USAID has a partnership with DFID and SDC on inclusive market systems facilitation. Our sister projects, Leveraging Economic Opportunities and the BEAM Exchange, are working together to gather and share learning about these approaches. How exciting to have CGAP embracing these with their funder guidelines. Our evolution is happily accelerating.