Boosting development through inclusive markets

The MaFI-festo
Boosting development effectiveness through facilitation
of inclusive markets and private sector engagement

(A MaFIi initiative to change the world)

Discussion Paperii - Operational Phase
(Version: January 2012)

Introduction:
The thinking and practice about the role of markets in poverty reduction has been evolving in the last
twenty years. From stand-alone credit provision in the 80s and early 90s, and access to business
services in the second half of the 90s, to an incipient but enthusiastic awareness amongst donors,
practitioners and the private sector about complexity and behavioral sciences, knowledge management,
learning systems, innovations systems, impact at scale, extreme poverty, volatile contexts, climate
change and environmental sustainabilityiii.
The traditional roles of stakeholders such as donors, practitioners, CSOs and private firms, and their
modes of collaboration, are also changing fast. This is in turn unleashing previously untapped resources
and promoting innovative business models, policies, practices and organizations that will change forever
how market systems work.
However, much more needs to be done to change the paradigms, principles, approaches, rules,
incentives and procedures that determine the structure and dynamics of the international cooperation
systemiv. Donors and practitioners can (should) work together to make these changes a reality and to do
so in ways that have important, long-lasting and positive effects on the scale of impact, sustainability,
speed and cost-effectiveness of inclusive market development initiatives.
The MaFI-festo synthesizes ideas, needs and experiences that MaFI members have been discussing
since 2010v. The discussions have focused on how the current architecture of the development
cooperation system is hampering the application of facilitation approaches in inclusive market system
initiativesvi, but also on the opportunities that could be created if the key stakeholders worked together to
improve it.

The MaFI-festo has three main objectives:
 To focus the attention of key stakeholders on a small set of strategic changes that are urgently
needed if the international development system is to effectively harness the full potential of
markets to reduce poverty at scale and protect the environment
 To promote convergence and collaboration between bilateral and multilateral donors,
practitioners and academic researchers working in the fields of “aid effectiveness” and inclusive
marketsvii.
 To inspire NGO leaders to promote the adoption of facilitation approaches and practices for
inclusive market development programs in their own organizations and networks
… and it is structured around six sections:
1. Guiding principles
2. Changing how we work in the field
3. Balancing flexibility and accountability
4. Building the capacity of facilitators
5. Changing what and how we measure change
6. Proposed activities

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1. Guiding principles
The following guiding principles underpin the design and implementation of the MaFI-festo:
 Collaboration: the MaFI-festo will create appropriate conditions for trust, dialogue and mutual
understanding between donors, practitioners and other key stakeholders; it is not about one actor
asking the others to make changes. The MaFI-festo will promote sustained learning,
convergence and collaboration.
 Engagement: the MaFI-festo will be used by MaFI members to engage, coordinate and make
synergies with other organizations or networks that are pursuing similar objectives.
 Practicality: the MaFI-festo is designed to achieve real change that has real impacts on the work
of field facilitators. The MaFI-festo is not only about imagining new solutions but also about
learning from donors and practitioners who are already embracing market facilitation approaches
and successfully changing the rules of the game of the international cooperation system.

2. Changing the way we work in the field
2.1. Focus on root causes, not symptoms
“We need to be able to work not only where the symptoms are showing but also where we have seen
that the causes are and they may not be close to where the symptoms are. We need to have the license
to work on those areas”. In order to do this, flexibility in intervention planning and implementation is
needed, based on a sound preliminary assessment of the market systems. This might have the
consequence that there is a need to work in different, connected market chains than the one that was
originally targeted, or to work in multiple value chains. “Sometimes we need to work with more than one
market system to achieve sustainability but most templates do not let us talk about these connections.
Also donors do not see the relevance if it is outside of the scope of the call”. Only by focusing on the real
root causes, both scale and sustainability can be achieved.viii

2.2. Focus on resilience and adaptability of the system
“If you encourage people to invest in specific types of assets you are very prescriptive. We cannot fall
into that mistake again”. More focus is needed on the basic capabilities that enable the poor and other
market actors to improve their situation in an ever-changing market environment. “A huge risk in our
work is when the most vulnerable move to new livelihoods strategies that may not work. It is a big
responsibility for us if our interventions end up dislodging communities from their traditional livelihoods. If
markets behave in unexpected ways, they may suffer extreme stress”.
A focus on resilience and adaptability of the poor can empower them to adapt to changing environments
instead of being locked in a path given by the project. It is important to keep in mind that the resilience
and adaptability of the poor is closely linked to the resilience and adaptability of the systems they are
part of.

2.3. Invest more in field-based, pre-design phase
We need to “invest in time for the facilitators to get embedded on the ground and build trust and dialogue
with the stakeholders before knowing what is going to happen”. A pre-design phase paid for by the
donors would allow facilitators to do a comprehensive, more realistic and appropriate system analysis. It
would also give them time to establish trust and a good relationship with all stakeholders, which forms
the basis for successful facilitation work. Field experiences from NGOs who have carried out
participatory, field-based, pre-design processes suggest that this phase can result in concrete changes
led by the market actors themselves (even before any formal implementation has started!) and helps the
facilitators to identify where the energy and interests of the stakeholders are and the types of initiatives
they are more keen to lead and own.

2.4. Test and promote co-volutionary experimentation
When we deal with complex systems there is no such thing as “the best solution (or solutions)”. We can
only talk about optimal solutions for specific contexts. Furthermore, we cannot know in advance what the
optimal solutions will be. It is also impossible to predict how a certain approach, mix of strategies or set
of optimal solutions will change the system or the situation of marginalized actors therein. To deal with
this challenge, complexity experts recommend an evolutionary approach where the system actors have
the right conditions to experiment with different ideas, evaluate the results, drop the ones that fail and
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fine-tune the ones that succeed. This requires effective organizational learning (both within and across
organizations), flexibility and co-volutionary (coordinated and evolutionary) experimentation.
Co-volutionary experimentation requires that teams working on particular aspects of a system (e.g. new
business models, technologies, techniques or organizations) create appropriate conditions for the
market actors to quickly test the new ideas or hypotheses, evaluate the results, drop the ones that fail
and fine-tune the ones that succeed. Furthermore, these teams must move forward in a coordinated
way; periodically sharing ideas about how the experiments are evolving and using each other’s
knowledge to maximize efficiency and appropriateness. Co-volutionary experimentation can be
challenging but it can reduce implementation costs, increase impact and maximize learning.

3. Flexibility and accountability: the ultimate balancing act
In contrast to the implementers’ need for flexibility, donors require a certain level of accountability
regarding the use of their funds. But the balance between flexibility and accountability in the context of
complex systems and facilitation has to be based on more than appropriate rules and procedures:

3.1. More trust between practitioners and donors: from contractors to long-term partners
There is still a strong tendency to reduce the relationship between donors and implementers to individual
tenders, contractual activities and monitoring reports. However, “trust between donors and implementers
is crucial in order to give the necessary flexibility in implementation and room to experiment and look for
root causes”. This is even more critical when dealing with complex, adaptive systems. Only relationships
that are built on trust and a sense of partnership between donors and implementers allow for the
necessary balance between accountability and flexibility in project implementation.

3.2. Faster organizational learning and shorter feedback loops
“Even the best plans and assessments are under risk of collapsing given our inability to predict how
complex systems [such as markets] can evolve, even in the short run”. Small variations in the process,
such as the presence or absence of a stakeholder, a comment made by a politician in the local
newspaper, or how a workshop is facilitated, can produce significant variations or disruptions that cannot
be predicted.
Flexibility without learning is a waste of precious resources. Conversely, flexibility with more effective
organizational learning systems and shorter feedback loops between stakeholders, implementers and
donors produce vital information about what is working or not in relatively short periods of time.
Clear hypotheses and theories of change, a well-structured and participatory pre-design phase, a basic
understanding of the market system’s structures and dynamics, and more frequent updates of the
market situation (inbuilt in the monitoring & evaluation system) can help to establish faster, iterative
learning cycles and controlled experimentation processes. The donors should be closely involved and
engage with the implementers as “learning partners”.

4. Building capacity: speeding up the paradigm shift
Facilitation is a mix of art and science; of skills and knowledge. Facilitation is about harnessing the
energy of the system and bringing in external energy and information when necessary. It is about
helping the stakeholders to find the solutions that make sense to them and that will be owned and driven
by them. It is “about taking the beneficiaries through an experience that will allow them to make
decisions themselves through learning”. Hence, facilitators have to find the right partners, build trust and
promote effective dialogue, amongst other key processes that are difficult to master without the right
training, mentoring and field experience. This cannot be left to chance; systematic and coordinated
efforts to build the capacities of the current and future practitioners are not only necessary but urgent.

4.1. From training courses to capacity building systems
In a context of high rates of field-staff turnover and constantly changing market systems, newly acquired
knowledge and skills need to spread quickly within and across organizations, and used by a larger
number of staff at different levels (not only field staff but also managers in head offices and donors).
More and better training courses for individuals are necessary but not sufficient to cope with the urgent
need to reduce poverty at a large scale in highly dynamic and volatile contexts. Short-term or hands-off
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(e.g. classroom, web-based or distant-learning) training has to be complemented with longer-term,
hands-on mentoring and/or coaching, sustainable and vibrant communities of practice and local support
and learning networks of practitioners and donors.
A systemic approach to capacity building is needed. In other words, an approach that promotes
coordination, collaboration and economies of scale between knowledge providers and users, improves
the incentives for learning and knowledge sharing, and invests in innovation and controlled
experimentationix.

4.2. From “overhead” to core development strategy
Development organisations often complain about high staff turnover in the field. This is especially a
problem after having invested in training their staff. This fact should not deter NGOs and donors from
building the capacity of the current and future generations of practitioners working on inclusive market
development. On the contrary, training them to become effective facilitators and creating conditions for
them to collaborate and coordinate interventions can become a development strategy in itself. And last,
but not least: more investment on capacity building, professional recognition and cross-organisational
collaboration are strategies that can reduce staff turnover rates; especially at the field level.

5. Building up the evidence: what and how we measure
5.1. Focus on structural and deeper change
What does sustainability mean in a context of constant change? “The concept of sustainability comes
from a very linear way of thinking: this is what we have done and we need to make sure that it continues.
We now know that the world changes all the time. The concepts of resilience and adaptation are more
appropriate.”
“The new set of questions [that should underpin this new breed of M&E] has to reflect that sustainability
isn't just about increased income [or jobs …]. The experiences and skills accrued in achieving resilience,
adaptability, self-esteem, identity, confidence, etc. have to outlive the specific sub-sector in which the
stakeholders operate during the program's life. The project is a means to a learning experience that
significantly alters behavior over the long-term”.
We have exaggerated the importance of incomes and jobs as indicators that can tell us useful things
about structural change and trends towards adaptability. According to complexity theory, these are some
of the most superficial aspects of a system’s structurex. They can be easily influenced by external
resources but, at the same time, are the least effective points to change the system’s structure and long-
term paths of evolution. A systemic M&E approach has to recognize the importance of measuring both
changes at levels that lie beneath the surface of the market system and trends towards adaptability,
scalability and inclusiveness.
Examples of deeper structures are buffers (e.g. savings and storage facilities), relationships and modes
of interaction (e.g. trust, transparency and frequency of contracts, and business models), feedback
loops, speed and quality of information (e.g. appropriateness of agricultural R&D and price info), the
ways in which the system organizes itself and –very important for poverty reduction, how the most
marginalized actors participate in this self-organization; the goals of the system (e.g. businesses that
add environmental conservation and poverty reduction to their profit-making goal), and the system’s
paradigms (e.g. the definition of fairness, rights, “the poor”, equality, etc.)xi

5.2. Focus on “systemic beneficiaries”
“We should not count the number of people directly benefited by us as a measure of our success. Our
success should be measured by our ability to re-wire the system so that there is more convergence,
collaboration, learning and coordination”
“Even if we subscribe to the fact that we will find better ways to target people and beneficiaries, it is very
reasonable to assume that the more we pursue a systemic approach the less we will be interacting with
the people we want to benefit [the poorest in the system]. Therefore, the concept of direct beneficiaries
“is not appropriate in the context of systemic facilitation where other ‘non-poor’ actors have to benefit
too”. Furthermore, “it hampers systemic thinking and planning; and discriminates and patronizes already
marginalized and vulnerable stakeholders”.

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Effective facilitators strive to create the right conditions “for the market actors to create and implement
optimal solutions that will move the system in the direction of more inclusiveness, productivity and
efficiency”. An excessive focus on direct beneficiaries hampers these efforts, promotes “dumb” subsidies
and rewards direct service and inputs provision.
We need to gain a better understanding of the structures and dynamics of the system and measure
changes at those levels, instead of wasting resources trying to establish clear attributions between our
interventions and the poor. The focus on attribution should be between our interventions and changes in
the system that will lead to and sustain poverty reduction at scale, resiliency and adaptability.

5.3. Monitor and evaluate the facilitation system
“We need an M&E system that is about learning, accountability to stakeholders and adaptive
management, and less about bureaucratic procedures, micro-management and supervision”. In other
words, in addition to monitoring and evaluating how the market system changes, we also need to pay
attention to the performance, structures and trends of the international aid system that makes facilitation
of inclusive markets possible (i.e. the facilitation system).
Examples what such system could measure are: the quality of interactions between donors and
implementers, the effectiveness of the learning and knowledge exchange processes, the flexibility and
lightness of the procedures, etc.
The Donor Committee for Enterprise Development (DCED), for example, is promoting an approach that
moves away from the micromanagement of M&E. Instead, they are promoting the compliance of the
M&E frameworks and procedures with a broad and practical standard. They are also advocating for this
shift, building the capacity of the implementers to use the standard appropriately and offering audits for
projects on their compliance with the standard. However, more has to be done around the issues of
collaboration, coordination and learning between the agents who are working to facilitate inclusive
market development.

6. Activities:
The following are possible activities that could be implemented by MaFI members on their own or in
collaboration with other organizations or networks. This is not an exhaustive list; on the contrary, MaFI
members are encouraged to come up with new activities, partnerships and synergies.

Cross-cutting (see The MaFI-festo Dialogues below):
 Preliminary workshops to increase information, awareness and capacity of MaFI members and
local practitioners to effectively engage with donors.
 Coordinate and/or participate in spaces that contribute to building an environment of trust, mutual
knowledge and respect between the key stakeholders who can drive this initiative forward. These
spaces can be seminars, conferences, workshops, informal meetings or webinars. Local
Learning Groups linked to MaFI can also play a key role in the dialogue between field
practitioners and country donor representatives.
 Put together a list of case studies that illustrate good facilitation practices and/or examples of
some of the ideas proposed here. These case studies can help us to unveil links between
organizational principles, rules or procedures and effective facilitation, measured in terms of cost-
efficiency, scale of impact and ownership by the market actors.
 A webinar series in collaboration with Microlinks and other knowledge platforms/networks such
as the M4P Hub and Business Fight Poverty, to discuss the cases, extract lessons and assess
their validity as supporting evidence.

Co-volutionary experimentation:
 Collection and analysis of existing cases of co-volutionary experimentation (if any), including
cases from outside of the development field.
 A team of practitioners, complexity experts, donors and experts in social researchers design and
fund one or more programs to field-test the feasibility of co-volutionary experimentation.

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Synergies with MaFI’s 2012 work plan:
MaFI is promoting other activities that are not included in detail this list but that will directly contribute to
the objectives of the MaFI-festo. For example:
 The MaFI-festo Dialogues: a project to promote dialogue, coordination and collaboration
between donors and practitioners and move the MaFI-festo forward (examples of the activities
that will be implemented are in the cross-cutting section above)
 The Complexity Dialogues: a project to promote learning between complexity experts and
inclusive market development facilitators.
 A new breed of M&E: Online and in-person discussions about M&E in the context of facilitation
and complex, adaptive systems: Discussions on MaFI, e-consultations, webinars, conferences,
and SEEP’s Practitioner Learning Programs (PLPsxii)
 Local Learning Groups and the Global LLG Network (a network of LLG champions to boost
local learning and coordination)
 Capacity building of field facilitators: a systematic study of the frameworks, methods, tools,
criteria and indicators used by leading trainers, coach and mentors (with a view to creating a
widely accepted CB standard)
Finally, MaFI itself is a mechanism to improve the efficiency of learning, shorten feedback loops, build
trust and increase coordination amongst practitioners and between them and donors and researchers.

Do you have great ideas, comments, questions or disagreements that could improve the MaFI-festo?
Are you doing something similar and would like to make synergies with MaFI?
Please get in touch with MaFI’s facilitator Lucho Osorio at luis.osorio@practicalaction.org.uk
Thanks!

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Endnotes:

i
The Market Facilitation Initiative (MaFI) is a working group of the SEEP Network, with the technical support of
Practical Action. More about MaFI: http://bit.ly/aboutmafi. More about the SEEP Network:
http://www.seepnetwork.org
ii
Special thanks to all MaFI members whose contributions have taken the MaFI-festo this far. A list of all key
contributors will be added to the final version of the MaFI-festo.
iii
For an interesting discussion about the evolution of enterprise development theory and practice over the past 22
years and an analysis of the hot topics for the future, see “A 20/20 retrospective on enterprise development: in
search of impact, scale and sustainability” by Linda Jones and Alexandra Miehlbradt in the Enterprise Development
& Microfinance Journal, Vol. 20 No. 4, December 2009.
iv
Also referred to as the “international aid system”
v
A synthesis of the discussions until May 2011 can be found at http://slidesha.re/mafifesto1 :“MaFI-festo:
facilitation friendly principles and rules for inclusive markets”, Working paper, revision 15 June 2011, edited by
Marcus Jenal and Lucho Osorio-Cortes. Another important milestone was a MaFI meeting in Washington, D.C., in
June 2011, where members of MaFI (both practitioners and donors) used this synthesis to discuss about the
progress made until then and the issues and challenges ahead. The aim of this meeting was to draft the
foundations for viable strategies and concrete action points around the issues identified up to that moment, and to
share examples where facilitation-friendly principles, rules and procedures are making a difference on the ground.
Important contributions to the issue of capacity building were also made by a group of participants of the M4P
Conference in November 2011: http://www.m4phub.org/conference2011/schedule-and-conference-materials.aspx
The quotes in this document come from the June 2011 meeting and were made anonymous for better readability.
vi
Inclusive market system development will be used throughout the document as an equivalent to M4P and VCD.
vii
Collaboration with private firms and other key stakeholders such as national and local governments, chambers of
commerce and sectorial research institutions is welcome. However, MaFI members agreed to keep a strong focus
on the collaboration between donors and practitioners during the first stages of implementation.
viii
“The key principle, called the ‘principle of the system boundary’, is that the interactions that must be examined
are those most important to the issue at hand, regardless of parochial organizational boundaries” (Peter Senge
(2006), The Fifth Discipline). This principle underpins the need for a radical rethink of the architecture of the “aid
system” because the thematic, organizational and budgetary silos of donors and NGOs impose restrictions for
facilitator to “keep an eye on the issues”.
ix
The details of what a systemic approach to capacity building is are beyond the scope of this document but will be
clarified by MaFI members and others as the MaFI-festo evolves.
x
What Donella Meadows calls “numbers”, the “constants and parameters” or the “stocks and flows”. Examples of
these are: national debt, taxes, subsidies, standards, amount of land set aside for conservation each year, number
of beds in hospitals, number of vaccines applied in a year, etc. Meadows, D. (2008), Thinking in systems: a primer,
edited by D. Wright, Sustainability Institute, pp 145-165. For a summary see
http://en.wikipedia.org/wiki/Twelve_leverage_points
xi
Idem
xii
PLPs are designed to bring practitioners together to learn about a specific issue and to share their lessons with
other practitioners around the world.

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