Design and Business Strategy

Pro-poor Value chain

A value chain refers to the cycle of a product or process, includes material sourcing, production, consumption and disposal/recycling process. Pro-poor value chain is to ensure sustainability and the generating beneficiaries of a firm. It is analysed to increase income and create job opportunities upon the developing firms.

Value chain analysis is important in understanding markets, inter-firm relationships, and the critical constraints that limit the targeted producer/enterprises growth and competiveness. Market based, commercially viable solutions to these constraints can result in impact that is sustainable in the long run and that does not distort local markets. This program design approach includes collaborating with and supporting the initiatives of Lead Firms that can increase competitiveness and support the development of other stakeholders in their value chains, including the development program’s target group.

There are many advantage for development programs to work with Lead Firms as providers of market based solutions. As established market actors, Lead Firms have incentives to sustain positive relationships with targeted producers/enterprises beyond the development program’s life, and so sustainability of the market-based solution is greatly improved. Lead Firms also have broad networks within the market and can apply market-based solutions to a greater scale at a much faster pace than a development project can. In a competitive market, Lead Firms providing market-based solutions often establish new market standards, thus driving sustainable growth and innovation in the industry.

 Two major strengths.

First, it is effective in generating benefits for a program’s targeted beneficiaris as it is based on a comprehensive understanding of the value chain that the beneficiaries are operating in. Second, it helps ensure the sustainability of that impact because constraints are addressed by solutions that are based in the existing market and its relationships. It is therefore more likely to continue after the program ends. This differs from “traditional aid” that often supplies goods/services directly to target beneficiaries in the market, or otherwise takes on a market player role, which usually does not continue after aid funding ceases.

Six-Step Approach

• Value chain selection
• Value chain analysis 
• Identification of market-based solution
• Assessment of market-based solution
• Identification of facilitation activities 
• Structuring collaboration and monitoring performance

Collaborating tools/method with Lead Firms:

Initial LF Identification

• vc analysis
• Newspaper ad, etc. 
• Expression of Interest from LFs

Structured Interview

• Write-up of Structured Interview with LFs
• Initial Due Diligence

Invitation for Application

• Applications from LFs

Due Diligence and Planning

• Site visits
• Inquiries

Agreements to Support LF Initiatives

• MOU and Addendums 
• Strategic planning sessions
• Capacity building activities
• Monitoring

Principles to guide implementation

1.     Promote sustainable relationships among market actors in the value chain

2.     Establish good collaboration with lead firms

3.     Professionalism, confidentiality and neutrality

4.     Ensuring the sustainability of impact 

5.     Understand private sector, business principles, and lead firm risks