[Stoves] India LPG stoves approach Fwd: [stove] Giving it up

Crispin Pemberton-Pigott crispinpigott at outlook.com
Fri Oct 2 13:48:36 CDT 2015


Paul, the government of Indonesia gave away more than 40,000,000 LPG stoves in order to stimulate a market that used a fuel with a lower subsidy than kerosene. The result was that 70% of the total population uses at least some LPG. About 40% use it as their primary cooking fuel, and 70% use wood to heat water. There is a large overlap indicating multiple fuel use, with a strong preference for wood to do the heavy lifting.

 

The shortfall was that the quality of the product was not good enough to last much more than a year so after 12 months failures started to appear. The consequence was negative for the image of the LPG fuel (not so much the short-lived stoves).

 

So it worked, created a transformation, but there were consequences.

 

Regards

Crispin

 

 

 

Hi Paul,

Thanks for sharing. Lets use these three points to base the discussion:


1. Tackling the root cause of market failure


Proponents of market system approaches believe that the best way to help people out of poverty is to address the underlying causes of market failure. Rather than focus very broadly (eg on macro-economic problems) or individually (eg on specific businesses or families), they instead look at the ways poor people and businesses interact in particular sectors. By analysing and understanding the characteristics of specific industries and value-chains, they can help make systemic changes that create lasting, inclusive growth.


2. Stimulating scale


Supporters of market systems approaches argue that firm-centred approaches are often insufficient on their own. That's because the systems that enable firms to prosper, services to expand and access to improve are rife with 'market failures'. As a result, individual businesses continually hit these 'systemic' obstacles, which prevent them and their competitors from scaling up to reach large numbers of poor people.

By contrast, market systems approaches seek to address the specific and unique underlying causes of poor performance in particular industries or sub-sectors.  By stimulating changes in the rules, relationships, barriers and incentives that affect how public and private actors behave, they can help important market functions to be performed more effectively. If successful, this improves the whole market system – enabling multiple businesses to innovate, grow, reach out and serve wider populations.


3. Intervening sustainably 


As every market system is dynamic, it is essential that systems approaches build the capacity of players to respond to future changes. This requires careful analysis of key market functions and players, and how they could work more effectively in the future, based on their different incentives and capacities.  

A market systems approach aims to align the policy objectives of a programme's intervention with the private incentives and capabilities of the key actors in the system. In some cases, this may partly compromise the immediate poverty focus of activities – but it means that results emerge from lasting changes in the market system itself, and are not just a temporary response to the activities of the programme.

By addressing the causes of market failure in this way, a market systems approach ensures that the social and economic benefits for poor people last far beyond the period of intervention.

(http://beamexchange.org/en/market-systems/rationale/)


I would say kind of a market systems approach. It doesn't really permanently offer a solution to resolve the market failure to the poor to access services. Its a temporary redistribution approach...but its not changing the market failure. This approach is more favorable in trying to stimulate scale...its a national program intending to reach large numbers, but unless you deal with the market failures there will still be barriers for the intended market. Its probably touching the third point a little, with other approaches in place that might not be mentioned in Kirks email.

The GACC for a long time has really supported efforts to do things at a market based approach. Seeing how every market is different and presents its own unique challenges, it's difficult to copy and paste the same cool idea from another market. I suggest that people on the listserv interested in looking at different models and approaches (pure market based, government partnerships, etc.) get more involved with the social enterprise sector and impact investing. There you will learn about how other business models in the social sector are reaching customers at the bottom of the pyramid and what techniques and strategies you can glue together to make things work in your own market. I remember the first time people started talking about Social Impact Bonds and everyone was super excited. Those are the kind of out of the box ideas that the stoves market is missing. 

I am much more of a supporter of creating a business that deploys all of the needed systems together (sales, distribution, after-sales, etc.) than rely on trying to create the magic partnership between various institutions to make the system work (its much harder to control the outcome when there are lots of actors and everyone has different motivators). But sometimes a mix of innovative partners works when you are trying to reach sale and serve more people.

Best,

Christina

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