Tactics to cope with donor distortion.
Market facilitation in aid intensive environments is an issue that needs little introduction as the challenges associated with it are common for programmes. Frequent questions asked on the issue include:
- How do you attract partners and assist them to develop sustainable pro‒poor business models when competition between donors means many businesses are looking for large‒scale grants rather than facilitation?
- Where an exciting new business model is developed, how do you stop other donors stepping in to provide their own ‘scale-up’ rather than market forces and commercial sustainability?
At BEAM’s recent webinar on the issue we explored these questions (you can listen again). Here, I highlight some of my key takeaways.
Different types of aid intensive environments.
Speakers distinguished between environments crowded with direct delivery donor projects, and those crowded with other facilitative projects. The two contexts suggest different approaches for programmes.
Working alongside other facilitative approaches is more likely to require coordination between programmes, including on strategy (e.g. what sectors and regions programmes focus on), implementation (e.g. sharing information on who is being partnered with) and measurement (e.g. coordinating approaches to attribution where work overlaps). Participants highlighted the potential for synergies which might include sharing market assessments and cost savings in combined staff training. As highlighted at a recent BEAM workshop in Nigeria, this coordination needs to happen at the programme level, but competitive and other pressures may mean donor support is needed.
Working beside direct delivery projects raises the same challenges highlighted above, and also the risk of large-scale grants and donor activity swamping the facilitation programme. As such, the webinar looked at tactics to cope with and leverage direct delivery projects.
Coping with donor distortions
Three tactics in particular were put forward:
- Influence how project partners make use of available donor money. For instance, help market actors develop and value sustainable financial models, and see the rationale of using donor funds for specific projects/strategy development rather than for covering core costs. Identifying a window of opportunity for a potential partner to receive funds from other donors, and getting in there first, can be a challenge. Yet, this seems a sensible approach to working with any partner ‒ to ‘donor proof’ them.
- Influence donor spending behaviour. Work closely with other donor agencies to help them both develop more sustainable financial offers, and target finance at critical market constraints. This involves programmes making concerted effort to establish themselves as trusted, knowledgeable and credible partners with donor agencies.
- Find a niche area to intervene in. Programmes can explore the potential to work in sub-sectors where donors are not present. This doesn’t mean working in 'less busy' markets ‒ there still needs to be relevance to the poor and an opportunity for change, but this tactic stresses the critical role of assessing feasibility in sector selection and intervention design.
Donors as market actors?
One of the key questions raised at the webinar was, should donors be treated as market actors? Based on feedback from webinar participants, the answer is ‘yes’. It seems clear that we need to understand how donors affect demand and supply in markets and feed this into intervention design. This involves including donors in market assessments and developing engagement plans to work with them. The potential impact of other aid projects needs to be a key consideration in determining intervention feasibility – more than is currently the case.
However should we go beyond this and treat donors as market actors in the same way we would treat other potential market actor partners? What would this look like and how would it be different to working with other market actors?
It would be valuable to see examples of market assessments that delve deeper into donor agency capacities, incentives and strategies, or that assess donor systems as sub‒sectors, and identify underlying failures and developing corresponding interventions/engagement plans. In places where donors are unlikely to leave a sector any time soon, perhaps they should be included in the programme’s future vision of the sector. In addition, projects may need staff or teams trained to specifically work with donors.
Next steps
Polling among participants revealed that 84 percent had worked in a programme affected by another aid project, and 79 percent said donor intensity was a serious challenge. Participants also voted on the next steps, the most popular options were:
- Produce advocacy materials to convince other approaches/donors, and then advocate. This suggests there is value in developing materials for donors that explain (and bust the myths about) the market systems approach and provide evidence of impact. BEAM has developed an evidence map and plans to develop introductory tools explaining the approach. The BEAM conference ‒ will also be a great chance to advocate for the approach at a senior level, and highlight the challenges of working in aid intensive contexts.
- Further consider the implications of treating donors as market actors. As described above, the idea make sense, but how far should we take it? What should it look like in real life? I’d be interested in reading your comments below on this.
- Focus on improving coordination between market system programmes. This was the number one 'to do' highlighted by participants – reflecting both very real challenges and collaboration opportunities. The webinar didn’t look at this coordination in-depth, and it could be appropriate that this is a focus in the future. How do programmes collaborate together? At what level, and who is involved? What does good practice look like?
There are some clear priorities for BEAM and the webinar speakers, but if you have something to share on the topic, for example how you collaborate effectively (or not) with other market system projects, let us know by posting a comment below. Helvetas will be leading a session as well at the BEAM conference around working in aid-intensive environments to take this discussion further.
Ashley leads BEAM's work on practitioner learning.
Listen to the webinar recording and download the presentation.
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