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M4P or ‘Making Markets Work better for the Poor’ is a market systems approach to economic development that seeks to understand how poor people interact with market systems, and therefore how change can take place within those systems to benefit them. Challenge funds, when used as a tool for private sector development, are typically a mechanism to incentivize and support the private sector to invest in ways which both assist businesses to grow as well as provide wider development benefits. Although challenge funds typically act on only part of the M4P ‘doughnut’ and generally support only one type of market actor (i.e. the private sector and not government or civil society), they can and have worked to achieve systemic change. This paper explores lessons learned on how the design and implementation of challenge funds can be adapted to maximize their impact on market systems and, ultimately, poor people

This special issue focuses on the ways in which microfinance and enterprise development initiatives do and do not help very poor people – that is, their capacity to ‘reach the poorest’.

Improved access by disadvantaged smallholders and other poor people to lucrative agri-food value chains remains one of the most promising options for reducing rural poverty at scale. There is general agreement that the private sector plays a critical role in building value chains with the rural poor; however, debate in EDM and elsewhere has said little about the conditions under which the private sector is willing and able to lead the way in building inclusive value chains. This crossfire brings together two experts, John Belt of the Royal Tropical Institute (KIT) and Jonathan Hellin of the International Maize and Wheat Improvement Center (CIMMYT), to debate the following proposition: Value chains are more likely to include and substantially benefit large numbers of poor producers, and to continue to do so, if they are initiated, financed and managed by private for-profit businesses rather than by donors or NGOs.

Karl Marx postulated that the owners of capital could use it to exploit those who only have their labour to sell; this article demonstrates private capital can use microfinance lending to extract the surplus from poor people in developing countries by charging high interest rates on loans that they use for running microbusinesses. The author makes recommendations that may help to make microfinance less exploitative.

‘Making markets work for the poor’ (M4P) is a generic approach to developing market systems that benefit poor people. Interest in M4P is increasing but there are still many misconceptions over what it is and why it is important. This article sets out to address these issues. The foundation for M4P lies in real world changes, new conceptual thinking and learning from the wider experience of development agencies. More recently, the positive experience of M4P in practice - and the results generated - are a strong argument for the approach. From an operational perspective, M4P presents a framework to define market systems, emphasizes the facilitation role of agencies and offers guidance in each element of the implementation process. Although there are a number of caveats associated with it, M4P has considerable potential to bring about pro-poor systemic change.

Agriculture is the main economic activity in Nepal, occupying more than 80 per cent of its workforce. Poverty is widespread and is largely a rural phenomenon. Over 70 per cent of the people earn less than US$2 a day (IFAD, 2007). Conventional approaches to alleviate poverty have met with partial success as they fail to address the real needs of the poor people. This article describes the experience gained by SNV (the Netherlands Development Organization) Nepal in the cardamom sub-sector through the promotion of improved drying techniques and the strengthening of key actors in the cardamom value chain. Initial results show that the use of improved dryers has provided smallholders with an additional income of $117 per hectare as a result of improvement in the quality of dry cardamom and savings in fuelwood, labour and cracking losses of cardamom capsules. These improvements in quality have additionally enabled traders to secure a higher price per tonne for cardamom from Taplejung. Recommendations to improve...

Banco Azteca is one of the fastest growing commercial banks serving poor people in Mexico. It has very different origins from the more usual MFIs, but what can these institutions learn from Banco Azteca about achieving scale and delivering quality financial products? What can they teach Banco Azteca about reaching poorer clients with fairly priced services?