BDS market development guide.pdf - PACA

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of both. All donor-financed support is a form of subsidy and has some impact on the BDS
marketplace and therefore the potential to be positive or negative (that is, distorting) with
regard to the objective of market development. Any BDS provider or facilitator will
recognize this reality. One typical response from BDS programs when justifying subsidies to
reduce the price of BDS to SMEs is that SMEs are not prepared to pay a higher price because
they are used to free services from other development programs or government. This is a
classic illustration of intervention distortion at work. Table 3 highlights some obvious signs
of both market development and distortion.
Table 3: Common Signs of Market Development and Market Distortion
Services
Providers
Consumers
Develop
The acid test: increased transaction
volume; larger market size
Range of products for different
consumers; innovation to meet new
needs
Greater number of differentiated
providers; financed by consumer fees;
cost base appropriate to financial
realities of market
Assertive consumers demanding good
value from providers; prepared to pay the
right price for the right product
Distort
Lower transaction volume; smaller
market size; standardized products;
minimal differentiation or innovation
Small number of providers; existence of
parallel providers (official subsidized and
unofficial market-based); increasing or
prevailing high degree of subsidy
dependence; bloated cost base from high
donor support and (expectation of more)
Continued expectations of subsidy;
reluctance to consider BDS as any other
product; low value placed on BDS
HOW SUPPORT FOR BDS SHOULD BE STRUCTURED?
There are three critical factors to consider in structuring support for BDS provision:
1. Invasiveness of Support: Where should we direct our support?
2. Intensity of Support: How much support and what nature of support is required?
3. Leverage of Support: How do we make (limited) support more effective?
Invasiveness of Support
There is a fine line between developing and distorting. Where we focus our intervention or
support partly determines this balance. We refer to this where as invasive: the closer or more
direct an intervention is in relation to the transaction between consumer and service provider,
the more invasive it is (Figure 13).
Microenterprise Best Practices
Development Alternatives, Inc.