The poor are entrepreneurial and diversified out of necessity; they have no choice but to engage in markets. While markets are always functioning at some level, efforts to increase market efficiency will provide benefits to all, including the poor. Specifically giving market interventions a pro-poor perspective will increase the impact on the poor, make them more effective participants in the economy, and lessen the burden on the state.  However, market interventions alone will not provide the long-term solution for poverty eradication. The modernization of developing country economies requires a movement of poor people out of low productive, smallholder agriculture and out of the informal economy. While the poor depend to a large extent on employment both in the informal and formal sector, their way out of poverty will be determined by the ability of formal businesses to grow and absorb laborers. This means that real change in the circumstances of the poor is linked to equitable, long term economic growth.

Despite the enormity of the challenge, there are encouraging lessons from recent experience that show it is possible to promote pro-poor growth of markets within efforts to build an enabling environment. Bridging the two worlds — the humanitarian and the commercial – brings greater impact to producers while strengthening overall market development. In the end, the more the poor are integrated into markets, they more they become part of the solution rather than part of the problem.

FEG’s Livelihoods-based market contribution

It is well understood these days that market ‘shocks’ are one of the most frequent and damaging hazards for poor households. By definition, being poor in most rural areas in the developing world means having limited means of production and capital: no or small plots of land, minimal assets and fewer livestock.  Labor is the one capital that poorer households can usually rely on and understanding labor markets and tracking staple grain prices must be at the heart of market-based interventions.  Aside from this,  information about the specific link between households of different wealth groups and particular labor markets has been largely missing until now.

FEG’s Livelihoods Baselines are replete with information about people’s access to markets, offering clear evidence of the role markets play in allowing households to generate the income they need to survive as well as obtain the goods and services required for growth and wealth generation.   Access to markets and the ways that those markets function have a substantial effect on the household economy. Click here for a summary of how an understanding of markets is relevant at different stages of HEA analysis.  Primary, secondary and tertiary markets for every livelihood zone and every major commodity (crops, livestock, labour, staple grains, etc.) are documented in FEG’s Livelihood Baseline Storage Spreadsheets, along with specific data on the amount of income each household group generates through each type of market.

In 2005, FEG provided technical assistance to the guide the development of market-led pilot projects in five chronically food insecure woredas in Ethiopia.  Baselines were created to identify the various income generating activities that wealth groups were engaged in.  A parallel market assessment identified market project opportunities as well as the financial viability of selected pilot projects.  Together the market and livelihoods assessment provided project planners and implementers information on potential market pilot projects, target beneficiaries, and opportunities and constraints.  The HEA baselines were also used to measure how and if each pilot project met the intended outcome of increasing household wealth.   For more information on this project click here.