In this series, we introduce how enabling environment reform tools created by USAID can lead to more robust market systems approaches for improved food security outcomes. This introductory post will be followed by closer looks at specific analytical tools. Follow @Fintrac to track the series and keep a lookout for installments all week!

The enabling environment — both formal and informal rules (societal norms and traditions) — influences market incentives that drive firms' and farms' behavior and decisions, the core of a market systems approach. (See here past examples of Feed the Future investments in enabling environment reforms as well as this technical note exploring the enabling environment in market systems). It is not a leap to say that rules shape outcomes. Policies, laws and regulations shape the costs and risks that farmers and other agricultural market actors bear, thereby influencing investment incentives and providing the framework for transactional relationships between each segment of the market system.

Agribusinesses face unique risks; they must navigate public policy concerns related to food safety, food security and often unique levels of market volatility for their products. Good quality laws and societal norms that are effectively enforced help the business of agriculture by de-risking investment, encouraging certainty, improving food safety regimes and reducing transaction costs, thereby putting more money in farmers’ pockets or reducing food prices.

Evidence-based policy and enabling environment reforms require robust, systematic and objective measurements of the effects that the enabling environment has on economic decision-making and the possible outcomes of reform efforts. The Feed the Future Enabling Environment for Food Security project and its predecessor, the Enabling Agricultural Trade project, and others have developed and employed a range of qualitative and quantitative tools that dig past mere symptoms to understand underlying causes of agricultural market challenges.

One such tool is USAID’s Commercial, Legal and Institutional Reform (CLIR) framework, which enables multidisciplinary analysis of the legal framework, implementing institutions, supporting institutions and social dynamics within market systems. The AgCLIR methodology, created 10 years ago and recently updated in 2017, utilizes this framework to examine constraints agricultural firms and farms face across an enterprise life cycle, from launching a business and accessing inputs to reaching end consumers through cross-border trade. Other tools utilize this methodology to drill down further into specific topics, such as SeedCLIR, a methodology that specifically focusing on the conditions necessary for developing a vibrant, commercial seed industry. The VcCLIR methodology uses a framework to examine constraints to economic growth along specific value chains.

Benchmarking tools are additionally valuable to quantify key economic indicators and allow performance to be compared across countries and over time. The Agribusiness Regulations and Institutions Index (AGRI) was a unique benchmarking tool USAID piloted to measure enabling environment indicators such as time, cost and procedures required to comply with rules within agriculture market systems. The AGRI Index inspired the World Bank to launch a new benchmarking tool, the Enabling the Business of Agriculture (EBA) Index, which introduces a comprehensive set of indicators to measure the effect of the enabling environment on agricultural sector performance.

Further analytical methodologies that have proven useful in distilling lessons learned for enabling environment reform include regional studies examining the scope and opportunity for cross-border regulatory cooperation, market and trade analyses to identify sector-specific constraints and opportunities, and gender analyses to quantify the differential impact of policies, laws and regulations on women’s commercial activity.

Over the course of this week, we will explore a series of analytical tools and approaches USAID employs to support and inform efforts to create a more supportive enabling environment for agricultural market systems. Stay tuned!