Why a systems approach?

To achieve lasting and widespread pro-poor change, we address incentives, behaviours and relationships among actors.

Market systems approaches differ from other private sector development approaches by focusing on promoting a different role for donor agencies, impact investors, governments and other development actors, in bringing about pro-poor change.

The common rationale is to address the underlying causes of poor performance in specific markets that matter to poor people, producing scaleable long-term change.

Tackling the root cause of market failure

Supporters of market systems approaches believe that the best way to help people out of poverty is to address the underlying causes of market failure. Rather than focus broadly on macro-economic problems or individually on specific businesses or families, they instead look at the ways poor people and businesses interact in particular sectors. By analysing and understanding this, they can help make systemic changes that create lasting, inclusive growth.

Stimulating scale

Supporters also argue that firm-centred approaches are often insufficient on their own. As a result, individual businesses continually hit obstacles that prevent them and their competitors from scaling up to reach large numbers of poor people. 

By contrast, market systems approaches seek to address the specific and unique underlying causes of poor performance in particular industries or sub-sectors.

They then stimulate changes in the rules, relationships, barriers and incentives that affect how public and private actors behave, helping important market functions to perform more effectively. If successful, this improves the whole market system – enabling multiple businesses to innovate, grow, reach out and serve wider populations.

Intervening sustainably 

As every market system is dynamic, it is essential that market systems approaches build the capacity of players to respond to future changes. This requires careful analysis of key market functions and players, and how they could work more effectively in the future.

A market systems approach aims to align the objectives of a programme's intervention with the private incentives and capabilities of key actors in the system. In some cases, this may partly compromise the immediate poverty focus of activities – but it means that results emerge from lasting changes in the market system itself, and are not just a temporary response to the activities of the programme.

By addressing the causes of market failure in this way, a market systems approach ensures that the social and economic benefits for poor people last far beyond the period of intervention.

Watch Oxfam's video on systemic thinking.

2 comments

  • What types of market failures are problematic for firm-specific approaches?

    Above, you say that, "Supporters also argue that firm-centred approaches are often insufficient on their own and rife with 'market failures'." Do you have specific examples? Or can you point me to any articles/papers that make a more complete argument against firm-centered approaches?

    Isaiah Oliver (1 year, 3 months ago)
  • Why firm-centric approaches are often insufficient to achieve lasting impact at scale?

    The arguments for using systems rather than firm-centric approaches were made comprehensively in A Syntheisis of the M4P Approach
    https://beamexchange.org/resources/103/

    More recently, the Beyond the Pioneer report also covers this ground from a different angle - drawing on experiences in several sectors.
    https://beamexchange.org/resources/106/

    Mike Albu (1 year, 3 months ago)
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