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, Timor-Leste 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 TIMOR-LESTE 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 Timor-Leste, MDF has identified the Agribusiness, Processing and Rural Distribution and Greenfield Industries as key sectors for growth and employment. In Agribusiness, Processing and Rural Distribution, MDF aims to create income opportunities for farmers. In Greenfield Industries, MDF aims to stimulate the growth of three emerging non-agricultural industries, namely construction, manufacturing and tourism, thus creating stable jobs outside of agriculture. Using Agribusiness as an example, MDF could work with a variety of market actors to achieve this including: exporters, wholesalers, food processors, agricultural input companies, supermarkets, distributors and logistics enterprises.
Following this example, one bottleneck MDF has identified is the struggle of current actors to buy, process and package crops produced by local farmers, such as maize and rice, for retail in the local market. While there is demand for these local grains, farmers do not grow much beyond what they can eat, and do not sell much because they have few and irregular buyers. Wholesalers and processors seldom buy these local grains, relying on imports instead, because they have difficulty accessing farmers, cannot buy enough of the grains, and do not have the ability to process and package them for local retail. So, MDF partners with existing wholesalers and processors to better connect farmers with local markets by helping these partners begin to source and process local grains.
The Partners improve their business practices by creating better links with local producers to increase local sourcing and improving their ability to process and package local grains for the local market. By building networks of local farmers and providing them with information on collection times, volumes and crop types needed, these wholesalers and processors can become a consistent and trusted buyer for farmers. Farmers can plan their crops better, knowing they have a regular buyer, and can confidently grow and sell more throughout the year. The wholesalers and processors ensure they can secure a consistent and quality supply of local grains and process it for retail in local markets. In this example, other agribusinesses will see the possibility and benefits, and also start to source a larger variety of crops locally, creating wider networks and benefitting even more farmers throughout Timor-Leste. Other farmers will have access to buyers which are more consistent, and will confidently grow and sell more, earning more income. Small farmers now have access to more consistent buyers, which provide regular information on the types and volumes of crops needed. Through these wholesalers and processors, farmers will be able to sell their crops throughout Dili and the districts. Farmers will plant more, earn more income and can increase their yields by investing more in farming. With better networks of local farmers, wholesalers and traders can secure more local grains on a consistent basis, and process and sell their products in domestic markets, increasing their market share and effectively substituting imports. Growth in local agribusinesses and in farm production 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 Industries. 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: Block E01-E04, 2nd Street, Palm Business and Trade Centre, Surik Mas, Fatumeta, Bairro Pite, Dom Aleixo, Dili, Timor-Leste Postal Address: P.O Box 254, Dili, Timor-Leste Tel: (+670) 3311 316 • Fax: (+670) 3311 328 • Email: info@cardnomdf.org www.marketdevelopmentfacility.org