Participatory Market Systems Development

(PMSD)
A short introduction to the Markets and Livelihoods Programme
approach to Making Markets Work Better for the Poor

markets are not working well for the poor

Markets are a powerful and versatile mechanism to get services and products to people
who can afford them but they are not totally efficient, equitable or inclusive, especially
in contexts where poverty is acute. The causes of inefficiency, inequity and
marginalisation are many and not fully understood but 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, law enforcement, etc
• policies, social norms, and legal frameworks that fail to promote investment,
transparency, competition and sustainable use of natural resources
• excessive concentration of power and influence in the hands of a few actors

Markets have the potential to connect marginalised producers to a large number of

people and give them access to valuable commercial and social relations, technologies,
experiences and assets that can help them escape poverty. The Programme is exploring
a participatory and systemic market development approach to make that potential a
reality for millions of rural families worldwide.

how do we understand markets?

Markets are complex, open and ever-changing systems composed of a wide variety of
actors who are
• interacting through many different commercial, social, political, and cultural
relationships
• interested in a particular set of products or resources
• making the best they can with the skills, assets and resources they have
• influenced by actions and intentions of others and the contexts and issues around
them

key features of PMSD

• Participatory: Understanding market systems, identifying blockages, problems

and opportunities and undertaking actions to make them work better for all, in
particular for marginalised producers, cannot be done by one or a few
organisations; this is a challenging endeavour that requires sustained
participation and collaboration of a wide variety of market actors, civil society
organisations, academics, practitioners, researchers and decision-makers.
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 • Systemic: A market system is composed of actors and the relationships
amongst them. A successful market improvement requires the transformation of
both actors and relationships. However, changes in one actor or relationship will
have impacts on different parts of the market system that are very difficult to
fully understand or predict. We cannot attempt to transform complex market
systems using linear thinking and top-down, rigid planning. We need to balance
our planning with enough flexibility to adapt to the reactions of the market due
to our initiatives or to external events such as economic and political crises,
violent conflict, changes in consumer trends, new technologies, and natural
disasters.
• Inclusive: Market actors are not inherently good or evil; most of them are trying
to optimise their outcomes from the role, position, and resources they have in
the system. Many of them are doing what they do because they have to, not
because they want to. For example, some people see intermediaries as
exploitative or unnecessary. We prefer to create the conditions for an inclusive
interaction where the voices and views of multiple actors are heard and debated
and from where initiatives to improve the market emerge. We act as facilitators
of market transformation processes that should be led by market actors
themselves in order to be sustainable. However, we also need to have adequate
knowledge and expertise about the markets we want to transform in order to
have the credibility to promote successful dialogue and collaboration.
• Sub-sectoral: The approach focuses on a specific product or ‘sub-sector’. The
product defines who belongs to the system and what issues or opportunities are
important. In other words, the product defines the system’s boundaries. We are
aware that this has both advantages (e.g. better communication amongst
actors) and disadvantages (e.g. risk of neglecting external factors to the system
but critical to its functioning).
• Multidimensional: Economics is just one piece of the puzzle. Social, political
and cultural factors are equally and in some cases more important than
economic or commercial factors. For example, a farmer might not sell to the
buyer who pays him more because he does not like his political views or because
he has traditionally sold his produce to a member of his extended family.
• Contextual: Context is fundamental to understand a market system and define
strategies to transform it. Market actors do not operate in a void; their decisions
and intentions are affected by many issues than can be within or outside of the
boundaries of the market system. For example, cultural traditions, geographic
location, political institutions, etc.

the market map: a powerful framework and participation tool

In order to make some sense out of the complexity of market systems, we use a model
that splits markets into three spheres that are constantly interacting and influencing
one another. The actors in these three fields, the relationships amongst them and the
forces that influence those relationships constitute a market system. These three
spheres are:

• Market chain: the chain of actors who own the product as it moves from
primary producers to final consumers. For example, farmers, intermediaries,
processors, exporters, wholesalers and retailers.
• Input/service providers: the inputs and business/extension services that
support the chains’ operations. For example, fertilisers and tools sellers;
microfinance institutions, banks, extensionists, transporters, business advisors;
agricultural research institutions; packaging designers and cooperatives providing
health or education services.
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 • Business environment: Infrastructure, policies, institutions and processes that
shape the market environment. For example, roads, quality of the soil, water
sources, telecommunications, agricultural policies, market trends, business
ethics, transparency and accountability and business organisations who can
influence regional or national governments.

The market map does not only provide us with a theoretical framework to design our
initiatives; we use it in Participatory Market Mapping Workshops as a visual tool to
promote dialogue, reflection, awareness, and systemic thinking amongst a wide range
of market actors and policy-makers1.

transforming markets: how are we doing it?

Transforming a market system in a participatory way requires the promotion of three

fundamental processes (note that each process is not undertaken by us but by other
actors). A successful PMSD process has to adequately promote all three
processes. The activities we implement and the strategies we use to facilitate these
processes vary in each case.

EMPOWERMENT FOR ENGAGEMENT

Our vision: Informed and empowered small-scale producers explore and exploit more
and better business opportunities for themselves and their communities.

To promote this process we facilitate the selection of groups of farmers or associations

by their peers. We pay special attention to the integration of women into these groups.
We work to improve their knowledge about the markets they want to engage with,
increase their confidence to interact with other strategic actors (e.g. buyers, service
providers and policy-makers) and their ability to articulate and communicate their
situation, problems and potential to others. We also create conditions to enhance
dialogue, accountability and learning between these groups of farmers and their peers.

Striking a good balance between market growth and the potential of marginalised
producers to compete in the market is essential for effective market development
facilitation. We assess both market growth trends (i.e. how demand is changing
through time) and the chances of success that empowered producers would have if
they were selling their produce under improved conditions and new actors. The
approach and contents of our empowerment-related activities depend on these
assessments and on the current situation of marginalised producers (e.g. the assets
they have, what they know and their context)

INTERACTION FOR COLLABORATION

Our vision: A wide variety of strategic actors such as marginalised farmers, traders,
buyers, processors, service providers, policy-makers, governmental agencies,
researchers, and civil society organisations collaborate in different ways to improve
the market system.

In order to facilitate this process we need to attract strategic individuals and

organisations to work with us to improve the market system as a whole. We try to
engage them on the basis of their interests and the possibilities that imperfect markets
1
A good reference for PMM is the paper by Mike Albu and Alison Griffith (2006): Mapping the market: participatory
market-chain development in practice, Small Enterprise Development Vol. 17 No. 2, pp 12-22. You can find this paper in
our website: http://practicalaction.org/?id=mapping_the_market or a longer version at
http://www.bdsknowledge.org/dyn/bds/bdssearch.details?p_phase_id=465&p_lang=en&p_phase_type_id=1
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offer to build win-win outcomes. For example, quality and policy improvements can
generate intense interaction and collaboration for market transformations amongst a
wide range of strategic and usually competing actors; whereas improvements in price
cannot because a gain for one actor is a loss for its neighbour in the chain.

We create spaces for dialogue, debate, trust-building, win-win relationships, business

explorations and joint action. Some examples of these spaces are participatory market
mapping workshops, interest groups or forums and business fairs.

In some cases, it is necessary to use special tools, such as vouchers and guarantee
funds, to motivate key market actors, especially service providers, to experiment with
new business ideas and models and engage with new potential buyers. For example: a
bank lending to marginalised producers, a farmer giving technical advice to his peers
for a fee and farmers experimenting with a new technology.

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 COMMUNICATION FOR UPTAKE

Our vision: Influential actors (e.g. policy-makers, media and entrepreneurs) convince
others outside of the project’s scope to adopt or adapt lessons and business models
emerging from it in other initiatives and contexts

This process plays a crucial role when it comes to scaling up market transformations
for the benefit of a large number of marginalised producers and other market actors in
similar markets. Without it, successes and lessons produced by our initiatives would
probably remain contained within the areas of our direct influence. Ideas that inspire
other market actors and policy-makers about new and better business practices or
models, more appropriate and pro-poor public policies, and higher quality and more
affordable services are fundamental to face the challenge of improving the livelihoods
of millions of small-scale producers worldwide.

In order to make this process work, we are constantly improving our research, learning
and communication capabilities to understand how market transformations occurred,
what the success factors were and what processes were critical; we distil knowledge
trying to strike a balance between theory and practice, and package it to make it
interesting for different audiences.

the role of technology in our PMSD approach

Technology is crucial to transforming market systems. It helps small-scale producers

and others in the market system to improve productivity and efficiency, conserve
natural resources, reduce costs, enhance communication with buyers and suppliers,
and to access new knowledge.

Market actors in general and small-scale producers in particular need easy access to
good quality information, technical skills and knowledge. They require the capacity to
choose the technology they want, learn about it and adapt it to their situation. The
processes of empowerment and collaboration mentioned earlier play a crucial role in
this regard. Improving the relationships between small-scale producers, traders, buyers,
processors, policy-makers, researchers and inputs/service providers contributes hugely
to their ability to make appropriate technology choices and provide technology
suppliers with abundant information to make adaptations and improvements.

Within the category of input/service providers we find individuals and businesses that
specialise in the development and provision of hardware (e.g. equipment, tools, and
vaccines) and software (e.g. technical skills, methods and standards). They play a
fundamental role in the processes of technology transfer and innovation in any
agricultural market. We work to promote access of marginalised small-scale producers
to local, national or international providers using market-based mechanisms and the
emergence of vibrant technology and knowledge markets that respond to their needs.

Technology change occurs within the wider context of social, political and economic
innovation. A group of farmers who set up a business venture or association; farmers
addressing policy-makers to reduce their tax burden; or a group of farmers and buyers
implementing a new, more transparent and equitable business model. These are all
examples of where wider social, political and economic processes may unlock
opportunities for technology innovation among producers, researchers, service
providers and buyers. By connecting stakeholders together around specific, shared
objectives, PMSD provides a unique opportunity to place technology innovation within
its wider context and transform markets in a sustainable way.