This post originally appeared on MarketLinks.

The USAID Feed the Future Bangladesh Agricultural Value Chains (AVC) activity aims to develop long-term food security in the Southern Delta Region of Bangladesh by applying a market systems approach to improve availability of diverse and nutritious fruits, vegetables and pulses in local, regional and national markets. To contribute to its Collaborating, Learning and Adapting (CLA) agenda, the project brought on two researchers to conduct an assessment of the systemic change effects to which AVC interventions have contributed.

The following case study presents an overview of AVC’s systemic change framework. The full case study can be accessed here. AVC sees systemic change as changing the drivers and biases that direct the way the market system self-organizes. This definition focuses on how a system changes and not just the results of such changes. Using this framework, the case study documents both the successes and sustainability of AVC’s interventions in the agricultural inputs market system.

Introduction

Market Systems Development (MSD) has emerged over the past decade as an influential perspective on development interventions. This new thinking can be traced to a number of sources including Springfield Center’s work on Making Markets Work for the Poor (M4P) and more recently, the work supported by USAID under its Leveraging Economic Opportunities (LEO) project to expand its well-known value chain framework to include strengthening the broader market systems in which value chains operate.

While based on different intellectual traditions, the two approaches share a number of features that are common to all MSD approaches.

They focus on core transactions and relationships between buyers and sellers. They seek to understand the “rules of the game” or the social institutions that affect those relationships. They also strengthen supporting services that are essential to the functioning of a core market system. All MSD approaches espouse facilitation to make markets work rather than substitute direct interventions for them. They avoid direct support to targeted beneficiaries when possible but instead focus on understanding and amplifying underlying processes and drivers to guide the market system along new pathways to become more efficient and inclusive of those same beneficiaries. The MSD paradigm, therefore, presents a fundamental challenge to donors and practitioners alike who tend to engage in direct support to targeted beneficiaries as the intervention mode of choice.

MSD has also been evolving. Perhaps the key difference of the “new” market systems view compared to earlier approaches is that current models tend to take a broader view of systems in which development problems are framed. Most contemporary approaches to MSD draw explicitly on systems thinking, evolutionary theory and complexity science while retaining tried and true insights from business management on value chains and the established wisdom from institutional economics on how rules of the game constrain and enable the choice sets of individual market actors.

Since the larger system has become the new focal point within the MSD approach, the notion of systemic change has moved to center stage in many industry-wide discussions.

The AVC activity is a strong exemplar of the new market systems approach. For the first two years, the project followed a traditional model of providing direct assistance to farmers through intermediaries, mostly SMEs and NGOs, to achieve production improvements within project pre-specified value chains. But in October 2015, AVC underwent a radical overhaul. Under the leadership of the new Chief of Party, Mike Field, AVC was completely transformed from a direct assistance project into one of USAID’s flagship market systems development programs. This meant, not only completely changing the strategy and implementation tactics of the technical approach but also building a high-performing AVC team that could quickly learn and adapt to new ways of working. Moreover, the internal operations had to be reformed to support the new technical requirements of partnering with firms around their own business strategies as well as being in strict compliance with all of USAID rules and regulations about grant-giving and procurements.

It took nearly a year to achieve this complete turnaround. It meant investing heavily in capacity building, opening up new opportunities to rethink traditional approaches and institutionalizing a strong cultural commitment on the part of the entire team to USAID’s CLA process. For a thorough treatment of this deep organizational change process, see Adaptive Management to Support Market Systems Development: A Case Study of USAID’s AVC Activity in Bangladesh. The case study serves as an important complement to the present work.