A lasting reduction in poverty can only be achieved through sustainable and broad-based economic growth. The poor need access to jobs and more productive livelihoods as well as essential services in order to improve their lives in a meaningful manner. The private sector is the engine of economic growth. The Market Development Facility (MDF) is a multi-country private sector development program funded by the Australian Government, currently operating in Fiji, TimorLeste and Pakistan.
MDF supports businesses with innovative ideas, investment and regulatory reform that will increase business performance, stimulate economic growth and ultimately provide benefits for the poor - as workers, producers, and consumers. MDF’s goal is to create additional employment and income for poor women and men in rural and urban areas through sustainable and broad-based propoor growth.
HOW MDF WORKS MDF begins by analysing who is poor and why. MDF also identifies growth opportunities in the economy which are relevant for the poor. MDF then identifies the bottlenecks to growth in each target sector, and the barriers which prevent the poor from benefitting from this growth. The poor may have limited access to necessary production inputs, services, and information; lack key skills; or face difficulties accessing markets or potential buyers. MDF does not work directly with the poor as this is unlikely to lead to lasting improvements. Instead it partners with a variety of businesses willing and able to invest in changes that improve business practices. This could include offering more affordable products and services, expanding distribution, or providing better information. Working together, the partner and MDF develop a plan called an intervention, to introduce these changes to the market. MDF signs an agreement with the partner to provide technical assistance and investment on a costsharing basis to help start up the intervention. Each intervention is implemented and managed directly by the partner. As a result, the partner develops an increased capacity to provide better or more affordable goods and services. In addition, because each activity becomes a part of the partner’s core business model it is commercially sustainable in the long-term, meaning that the poor will continue to benefit long after MDF comes to an end. This change in behaviour of the partner improves the way the markets around the poor work. The partner’s competitors, suppliers and customers will see the benefits of changing business practices and begin to adopt similar, pro-poor practices - with or without assistance from MDF. In this way, MDF generates impacts that are long-lasting and far-reaching. Changing the behaviour of an entire sector stimulates growth and provides greater opportunities for the poor. While businesses experience increased productivity, poor producers and consumers gain improved access to essential products and services to improve their livelihoods. As a result, companies employing poor workers grow faster while poor producers, such as farmers and small workshops, can produce more or higher value products. In this way, sustainable broad-based economic growth creates more employment and income earning opportunities for poor women and men leading to a lasting reduction in poverty.
MDF IN FIJI MDF identifies opportunities in the economy for pro-poor growth
MDF develops partnerships with businesses and business regulators to increase growth and improve service delivery
Partners implement improved business practices
Markets around the poor work better
The poor benefit from improved access and growth
Additional jobs and income are created for the poor
In Fiji, MDF has identified the Tourism and Horticulture sectors as key sectors for growth and employment. In the Tourism sector, MDF aims to create employment and supply opportunities for farmers and SMEs. In the Horticulture sector, MDF aims to increase farmers’ yields and incomes and stimulate agro-exports. Using the Horticulture sector as an example, MDF could work with a variety of market actors to achieve this including: exporters, wholesalers, food processors, agricultural input companies, associations, hotels and resorts, supermarkets and distributors.
Following this example, one bottleneck MDF has identified is that farmers have limited access to extension services or other alternatives which result in farmers using ineffective cultivation techniques, experiencing low yields and facing high rejection rates for export. MDF then develops partnerships with existing market players such as horticulture produce exporters to provide farmers with knowledge and inputs to increase their yields; improve their quality for export markets, and extend their production seasons. The exporters lack sufficient supply of produce to meet overseas market demand and have a strong incentive to improve the productivity and quality of produce to meet this demand.
The Partners improve their business practices by incorporating private extension services into their business. By providing farmers with the right information on improved cultivation techniques and quality requirements, these exporters can help farmers increase production and improve quality. The exporters also ensure they secure a consistent and quality supply of local produce for exports. Farmers also benefit through accessing a new market and can confidently grow and sell more throughout the year.
Competitors and suppliers also begin to adopt new business practices; and other farmers begin to copy improved cultivation techniques. In this example, other exporters and wholesalers will also start to provide private extension services and extend their sourcing networks which will benefit even more farmers throughout Fiji. Other farmers will copy the improved cultivation techniques applied by those farmers who are touched by MDF’s intervention; and they too will benefit through increased yields and sales.
Small farmers now have access to extension services and improved information; can increase their yields, improve the quality and extend cultivation seasons or develop new crops; and can reach new export markets with a greater variety of crops. As a result, these small farmers will grow, by increasing their production and increasing their sales. With consistent, high-volume and high-quality produce, Exporters will reach new overseas markets and continue to grow.
Growth leads to increased income and employment and improves livelihoods for the poor.
MDF’s Guiding Principles
MDF follows a systems approach to achieve sustainable, broad-based pro-poor economic growth and adheres to the Donor Committee for Enterprise Development (DCED) Standards for Results Measurement. MDF’s approach is based on the understanding that markets play a central role in the lives of the poor. The poor interact with markets every day as workers, producers and consumers. They need agricultural inputs for farming, buyers for their produce or products, places to work and other essential services and utilities to support their family. MDF begins with a thorough understanding of problems within the market and the incentives of market players. Rather than working around these market systems by working directly with the poor, MDF harnesses the creativity, energy and commercial interest of the private and public sector to increase economic activity and improve service delivery for the benefit of the poor. For this reason, MDF works directly with the buyers, sellers and regulators in the market. Tailor-made solutions are built around the realities of the market system in order to create an environment for sustainable propoor growth. MDF emphasises results and real-time learning as an integral process to the Facility and its management. For this, MDF adheres to the Donor Committee for Enterprise Development (DCED) Standards for Results Measurement. MDF creates a clear understanding of expected changes as a result of each intervention. This allows a better understanding of impacts and their attribution to MDF’s investments and also helps in day-today management and decision making. At each step along the way MDF can measure if the expected changes take place; and in real-time understand progress towards its goals or identify where adjustments need to be made. To determine MDF’s overall reach and impact; three universal impact indicators are used to measure the scale of impact, the additional income generated and the additional employment created as a result of its interventions.
Multi-country Facility
Designed as a multi-country facility, MDF has plans to continue its expansion. In each country, MDF develops a portfolio of interventions within sectors that are relevant for pro-poor growth. In Fiji, MDF is initially working in two sectors: Tourism and Related Support Industries; and Horticulture and Agro-Exports. In Timor-Leste, MDF works in: Agribusiness, Processing and Rural Distribution; and Greenfield Projects. These were identified as each country’s most important growth and employmentgenerating sectors. MDF’s flexible design includes Country Implementation Teams within each country supported by a central Core Program Management team. This design gives the Facility the ability to scale-up efficiently across countries while tailoring strategies and implementation to the local context. MDF can therefore utilise best practices and cross-country learning to create a tailored approach to achieve sustainable economic growth and poverty reduction in each country.
Partnering with MDF MDF’s role is to build on the potential for pro-poor growth and innovation within the private sector and to act as a catalyst for ideas and information that contribute to this growth. MDF’s Business Advisors continually engage with a wide variety of businesses in each sector. They actively seek out potential partners to work with to discuss opportunities and are always open to new ideas. Potential partners and MDF Business Advisors work closely together to transform initial ideas into detailed action plans. These activities are commercially sustainable and have a demonstrated link to poverty reduction. For each action plan MDF and its partner will sign a Partnership Agreement, specifying a cost sharing arrangement. The partner implements the intervention as a part of its business activities; while MDF monitors the intervention and measures its pro-poor impact.
Australian Aid- managed by Cardno on behalf of the Australian Government
Business Address: 91 Gordon Street, Suva, Fiji Islands • Postal Address: P.O. Box 359, Suva, Fiji Islands Tel: (+679) 3100 272 • Fax: (+679) 3100 274 • Email: info@cardnomdf.org www.marketdevelopmentfacility.org