Can market systems development build resilience in fragile contexts? A Case Study of Making Vegetable Markets Work in Myanmar

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Executive Summary

Mercy Corps’ Making Vegetable Markets Work for Smallholder Farmers in Southern Shan and Rakhine States (MVMW) aims to ensure smallholder farmers in Myanmar benefit from economic growth opportunities arising during a period of rapid market liberalization following the end of military rule. Using a market systems development (MSD) approach, the program partnered with market actors to increase access to production technology and services, and improve farmers’ connections with input suppliers and buyers. In its first phase, the program focused exclusively on Southern Shan State, which is the focus of this assessment. At the time of this assessment, MVMW farmers in Southern Shan State had seen positive results with evidence suggesting that 20% of farmers had seen a 50% increase in income and a 25% increase in production values over the 3-year implementation period. Despite this promising growth, these farmers remained vulnerable to economic and ecological shocks and stresses, including volatile price fluctuations, pests and disease, unpredictable rainfall and soil degradation, all of which hinder their ability to achieve their long-term development goals.

Through this assessment, Mercy Corps worked to assess the program’s impact on risk reduction in Southern Shan State, to identify opportunities for strengthening resilience among smallholder farmers and for enhancing the program’s long-term economic impact in fragile contexts. The following key recommendations emerged:

Assess risks holistically across market actors to inform partner selection and MSD intervention design

The analysis of MVMW revealed that while farmers were consistently vulnerable to market price shocks, pest and disease outbreak and climate variability, market actors at all levels were threatened by shocks and stresses. The programs’ limited awareness of a large export company’s sensitivities to global commodity price shocks in the vegetable market led aNo contract farming partnership with local farmers to falter. Similarly, initial uptake of improved agricultural technology stalled because the program did not recognize how social ties and trust among existing input suppliers manifested as essential debt reduction and support in difficult seasons, helping farmers manage risk. These challenges highlight the critical need to assess vulnerability at all levels, and to understand how risk factors into market actors’ decision-making. Such analysis can help programs select or appropriately support private sector partners and tailor design interventions that facilitate risk reduction for farmers and across the market system.

Identify and leverage social networks to enhance markets’ risk-reducing potential

Cost off-setting measures such as vouchers were found to be less effective at expanding market linkages and building access to new technology when they required farmers to forego long-standing, trusted input supply chain networks that provided access to low-interest loans or loan deferral in hard seasons. Initially, when the program partnered with centralized input suppliers outside of beneficiaries’ trusted networks, the poorest farmers did not have access to embedded credit and were thus unable to pay the remaining costs. MVMW’s early challenges around contract farming also highlighted the importance of social capital between private sector partners and farmers. Farmers’ distrust and uncertainty around a contract farming company’s extension services and pricing structure increased their reluctance to shift their agricultural practices, ultimately decreasing the quality of their produce.

Leverage transitional smart subsidy models to develop markets for risk-reducing products and services in fragile contexts

MSD programs have long used smart subsidies to reduce investment risk. This analysis suggests that smart subsidies can reduce a range of ecological and market-related risks for producers and other market the short term by incentivizing the trial and adoption of new, risk-reducing technology. This can have cascading benefits, by fostering market access to resilience-building products and services critical in volatile, shockand stress-prone environments. In Southern Shan State’s fragile vegetable market system, MVMW ultimately adapted its sliding scale subsidy model for agricultural inputs to improve farmers’ awareness about more resilient agricultural production models, and to encourage farmers to experiment with new technology. The new subsidy model further allowed agricultural input wholesalers and retailers to expand their businesses in selling agricultural products and technologies that improved farmers’ resilience. The assessment also found that such smart subsidy models would be most effective for resilience building if based on a comprehensive risk analysis that includes farmers’ social, ecological and economic incentives and risks.

Enhance markets for resilience-building extension services alongside those for improved technologies

Without access to extension services—and the information and training they provide—many farmers employ poor agricultural practices that reinforce cycles of low yields, quality and salability, factors which ultimately undermine their vulnerability and lower their resilience. Acknowledging that increasing farmers’ access to markets for improved technologies can only increase productivity and build resilience if they have the right knowledge and skills and see the benefits of applying these practices, MVMW partnered with East-West Seed to promote good agricultural practices. This partnership targeted an information gap unfilled by input supply networks. High participation rates—coupled with significant replication of practices among those who did not attend—signaled a significant demand for information and training among farmers. Beyond enhancing market access to agricultural technologies for resilience, this local demand for extension services may signal a willingness to pay for marketbased models for advice, despite current activities being subsidized through MVMW.

Identify and address information asymmetries within all systems—ecological, economic and social—to ensure farmers can understand and comprehensively plan for shocks and stresses

Because farmers lacked the information necessary to plan effectively or make calculated decisions about how to manage potential ecological and economic risks, market volatility and climate variability continued to limit the effectiveness of agricultural extension interventions—and productivity of the new technologies MVMW introduced. While addressing information asymmetries has been a core component of MSD work, this analysis highlights farmers’ need to access a holistic package of information, including climate and ecological, market fluctuation, and agricultural information (i.e., techniques, products and services). When input sellers have access to and use this same information in decision-making, they stand to build both their resilience and that of the farmers who rely on their products.

Overall, findings from MVMW underline the potential of the market systems development approach to have wide-reaching benefits for resilience. By facilitating farmers’ market access to affordable, riskreducing technology and improving their knowledge and skills in risk-reducing agricultural production techniques, the program helped build key resilience capacities that helped farmers better manage shocks and stresses. However, the analysis also found that MSD program outcomes could potentially yield greater results for both MSD and resilience if interventions better consider the full set of complex risks and related incentives that drive decisionmaking and behavior change among farmers and other market actors. Program interventions could have also considered additional resilience capacities such as facilitating access to market and climate information more holistically to support greater dividends for resilience to strengthen market outcomes.