What is Market Systems Development (MSD)?
MSD is a new development aid approach which has recently been applied by different aid agencies especially donors such as the Swiss Agency for Development Cooperation (SDC) and the Department for International Development (DFID).
This approach aims to make the market system function better in order to increase the quality of life of poor people.
The key features of the MSD approach include:
- Systemic action – understanding where market systems are failing to serve the needs of the poor, and acting to correct those failings;
- Sustainable change – delivering sustainable outcomes by better aligning key market functions and players with the incentives and capacity to work more effectively;
- Facilitative role – determining a catalytic purpose for the development agent that stimulates, but does not displace, market functions or players.
Economic development is highly dependent on well functional markets. Markets that function well have stimulate investment and encourage firms to innovate, reduce costs and provide better quality jobs, goods and services to more people. The involvement of poor people in economic growth is the best way to get people out of poverty. The last few years have seen an upsurge of interest in market development approaches amongst aid agencies, especially to donors such as the Swiss Agency for Development Cooperation (SDC) and the Department for International Development (DFID).
How to implement MSD?
MSD emphasizes explicitly that the role of intervention is temporary and catalytic. Agencies should avoid performing market roles directly and try to facilitate market players to perform more effectively. Interventions therefore need to be sensitive to local market conditions and seek to stimulate deeper and larger change by “crowding in” other players to improve the functioning of the market system. Successful facilitation, although not a fixed model, requires organizations that have credibility, independence and relevant knowledge and skill.
Operational Guide for the Market System Develpoment (MSD) approach
Donor Committee for Enterprise Development (DCED)