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The past, present and future of market systems development - reflections from the Australasian Aid Conference

The Australasian Aid Conference was held last month in Canberra, hosted by the Australian National University’s Development Policy Centre in partnership with The Asia Foundation. Alwyn Chilver, Palladium’s Director of Economic Growth in Asia Pacific, shares his reflections from the conference and explores how far we’ve come and how much further we can go in market systems development.

Alwyn Chilver, Palladium’s Director of Economic Growth in Asia Pacific, presented at the March Australasian Aid Conference in Canberra.

As in previous years, the aim of the 2017 Australasian Aid Conference was to bring together researchers from Australia, the Pacific, Asia and beyond who are working on aid and international development policy to share insights, promote collaboration, and help develop the research community. It was really refreshing, inspiring even, to attend and present at this year’s conference. I had the opportunity to reflect on the great strides that have been made in this part of the world, and by Australia’s Department of Foreign Affairs and Trade (DFAT), to get market systems development (MSD) to where it is today.

From the initial ‘baby steps’ of DFAT-funded challenge funds back in 2006, to the challenging birth of the Cambodia Value Chain Program (CAVAC) in 2009, we have all come a long way. But what I find most exciting is how much further we could all go.

A regional evolution

Market systems development – otherwise known as market based approaches, or Making Markets Work for the Poor (M4P) – hasn’t come easily to the Australian Aid Program. DFAT has historically liked to have a clear narrative about where and when its aid dollars will be spent, an upfront plan about how development is going to happen, and a clear directive ensuring that aid only goes to partner governments or accredited NGOs. Diving into the chaotic world of business has been a big step. MSD programs can’t predict what is going to happen; instead they place a heavy emphasis on analysing all actors and players in a particular system – whether they be farmers, fertiliser sellers, maize buyers, government extension workers, or exporters. These programs see how a market system might be poked, prodded and encouraged to work better; work better that is for poor farmers, but better for businesses too. Importantly, MSD programs work carefully, but ruthlessly, to only back win-win scenarios to ensure the sustainability of any market changes.

Huge progress has been made in establishing and implementing MSD programs throughout the DFAT portfolio. This evolution was boosted significantly by Foreign Minister Julie Bishop’s call to action to the department to innovate and think about the private sector in everything they do. DFAT now has a large suite of 10-12 such programs in a range of countries.

Focus on Indonesia

Through the PRISMA program in eastern Indonesia, for example, Palladium has helped the global agrichemical company Syngenta introduce early ripening technology to poor mango farmers. Syngenta wasn’t familiar with the mango sector so hadn’t tried to apply their technology in this industry. Neither did they have experience promoting and selling their technology to such large numbers of poor farmers. Working together we designed and implemented a pilot that focused on mango collectors as the key medium through which to access mango farmers. The pilot was successful and Syngenta have secured backing from their senior leadership and scaled-up the approach, reaching thousands of Indonesian women and men farmers.

At the conference, a colleague from DFAT and fellow presenter encouraged the audience to explore the economic context within which we work long before any aid dollars are spent; take a few risks as you prod and poke the market system, and then – just maybe – you might hit the jackpot and bring about sustainable change that has the potential to scale exponentially.

The story of PRISMA: driving Positive Impact through market systems development

The PRISMA program is actually a great example of what Palladium refers to as Positive Impact - the intentional creation of enduring economic and social value. Every deal that PRISMA makes with a business is predicated on a win-win outcome – more profit for the business, and better lives or opportunities for poor women and men. And this is why Palladium is so wholly committed to MSD approaches – because they are vehicles by which we can generate Positive Impact at huge scale.

Through PRISMA, we currently have around 40 Positive Impact partnerships underway with businesses that operate in remote, poor parts of eastern Indonesia. These sometimes involve civil society partners and local government, but they are always structured so that all partners have a strong incentive to continue to grow new business practice, new technology, or new business partnership arrangements beyond the life of the program. We use rigorous measurement techniques to quantify the number of beneficiaries, their poverty status and the scale of benefits generated; so far we have benefitted over 220,000 poor women and men, with an average net income increase of 139%. We expect to benefit over 1.5 million people by the end of 2018. It is exciting to see these Positive Impact initiatives are now starting to rapidly scale on their own. So far, our business partners have invested over $1.8 million of their own funds in these new business models and increased their turnover by $5 million, figures that are set to continue increasing.

Taking it further

The other thrill of MSD programs like PRISMA – for DFAT, for Palladium, and for tackling social challenges around the region – is that they provide a platform and a launch pad from which we can attract major corporate and investor interest to take new and more inclusive business models to scale. This is an exciting potential next step.

As explored at the Australasian Aid Conference, we’re just at the cusp of exploring how best to realise these opportunities with DFAT. We’ve come a long way and DFAT now has a strong foundation of programs that are fostering private sector partnerships and impact investing opportunities. Now is the time to seize the initiative and take this potential Positive Impact to a whole new level.

Visit our Economic Growth page to learn more about Palladium’s work in Asia Pacific and around the world.