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MARKET SYSTEMS DEVELOPMENT
WHAT IS MARKET SYSTEMS DEVELOPMENT?

Market systems development (MSD) is a relatively unexplored area in development. While it builds on market development, it addresses the capacity of a market system to absorb, adapt, or transform in the face of shocks and stresses. Within the broader economic, political, socio-cultural, and environmental systems in which they operate, markets are a means of allocating resources to solving system problems, such as those related to shocks and stresses.

Market development typically involves working within economies and societies at the level of the value chain to shape poverty alleviation and economic growth opportunities for the vulnerable, poor and disadvantaged, be these smallholders, producers, the ultra poor, or others in society. Generally speaking, beyond a focus on specific value chains, MSD activities are increasingly focused on strengthening the broader market system in which value chains operate. 

You can visit our blog for additional resources and learning on MSD. 

The main features of the market systems approach include (but are not limited to): 

  • Addressing the underlying reasons, incentives, and biases for how and why businesses, people, and networks (i.e., the systems) are operating as they are and have not adapted to develop a solution to the problems they are facing themselves. 

  • Extending beyond individual value chains to build the capacity and resilience of local systems. 

  • Considering behavior patterns, flows of information and finance, relational networks, trust and dispute patterns, and interconnectivity and patterns of influence between market systems and other social systems (i.e., political, civil society, communal friends & family, etc.). 

  • Market systems are structurally complex with many interconnections, making it difficult or impossible to isolate changes in markets from political, cultural, natural resource, and other systems or changes at the governmental level from the household level.

  • Systems thinking makes clear that the emergent patterns we see in market systems are the result of a complex and dynamic network of interactions among individuals, households, communities, value chains, other interconnected systems, and so on. These interactions include feedback loops filtered through systemic biases or mental models, which in turn shape how systems respond to stimuli, such as shocks and stresses. What this means is that the complexity of the interactions, the synergies among them, and the embedded biases of the different actors make systems different from simply an amalgamation of all the parts of the system. Thus, in the short term, individual market actors may thrive at the expense of the wider-community or market-system resilience. Conversely, actors may fail but the system could become stronger.

  • ​Understanding system biases (i.e. slow-moving variables) can be critical to achieving longer- term resilience and transformative change. Fast-moving variables should not be ignored but rather understood for what they are (i.e. while they can change quickly, they can also change back quickly without meaningful change in the system).

  • Market systems are dynamic and constantly evolving. Thus--in those contexts where the system is producing outcomes that are less than ideal for individuals, households, and communities— the objective for practitioners should be to catalyze a shift in the orientation and direction of the market system that aligns with better outcomes, including improved resilience capacities.

  • ​Facilitation needs to guide market systems in a direction that enables individuals, communities, and systems to solve their own problems and allocate resources--through market mechanisms--to better absorb, adapt, and transform in the face of shocks and stresses over the long run.