CASA Programme Approach: Blending Market Systems and Investment Promotion

Is the CASA programme a Market Systems Development (MSD) programme or an investment initiative? During one of CASA’s adaptive management meetings this question was debated. Three interesting insights emerged that are worth sharing. 

Insight 1: CASA is a blend of the MSD approach and an investment initiative.

The CASA programme is not a typical MSD programme but a hybrid between an MSD and an investment initiative.  A typical MSD approach seeks to change the way that markets work, so that poor people are included in the benefits of growth and economic development. MSD tackles market failures and strengthens the private sector to create large-scale, lasting benefits for the poor.  This differs from investment focused initiatives that provide direct investments into businesses that have high developmental impacts. Siddarth Khadka, CASA Country Manager believes that ‘‘CASA uses MSD methods and tools to analyse potential private sector SME partners as well as core constraints and intervention areas’’.  The result of both approaches is to benefit the poor by improving development outcomes.  

CASA’s blended investment approach provides direct support to SMEs to enable them to attract investment from third party sources and to crowd-in more smallholders in their supply chain. It also supports producer organisations to be able to aggregate larger volumes of the target commodities and to sell through formal supply chains. Finally, it works around improving the business enabling environment to promote competitiveness in the target sectors, so it makes for more long-term, sustainable intervention outcomes.

Insight 2: The agri-output business is the key focus for CASA

CASA supports SMEs to scale up their output business – it does not provide support to SMEs that are essentially in business to provide inputs to the agricultural sector.  But the distinction between an agri-output and agri-input business is not always easy to make. For example, an SME producing day-old chicks would not meet the CASA criteria, while an SME producing poultry is a potential partner of CASA. Similarly, an agro-vet would not meet CASA’s partnership criteria, but a feed supplier meets the criteria. A seed multiplier would be included in CASA but an agro-dealer selling seeds would not be included. That seems strange but the explanation is simple.

Day-old chicks are an input into the poultry industry, while poultry itself is an output. Feed is an output market for the crop sub-sector such as maize – but at the same time it’s also an input to the animal sector.  Farmers that multiply seed would be captured as SMEs under CASA, but sales to other farmers who are buying seeds from the seed multipliers (as input into their own farm enterprise) would not be included as a business under CASA. It’s interesting to note here that the higher yields and productivity of the farmers buying seed are traditional MSD outcomes!

So, although CASA focuses on agri-output businesses, there are unbreakable linkages to agri-input businesses. This means that SMEs working with CASA must work directly with input service providers to ensure that support is given to farmers that supply their business. ‘‘So even though CASA does not work directly with farmers, by investing in the SME, there is a link to the farmers’’ says Silas Ochieng, the Regional Results Measurement Manager for CASA.

Finding viable SMEs that are fully invested in agri-output businesses is not always an easy task. This is due in part to that most donor and government support has prioritised agri-input businesses.  CASA is working to change that.

Insight 3: Additionality and modality assessment tools key to value proposition  

CASA has been using the additionality assessment tool designed for private sector development initiatives to identify and profile SMEs alongside a modality assessment tool. ‘’The modality and additionality assessments help to keep focus on what it means to develop systems in a manner which is systemic and which will deliver targets, “says Ailsa Buckley, advisor to the programme.

These tools are helpful in making investments sustainable and scalable for several reasons:

• They help in assessing partners for the CASA intervention.
• They help determine that the investments triggered by CASA are additional to what would happen anyway.
• They assist selected SMEs to better understand how to attract additional investment and financing.
• They are used to clarify the value proposition and offering of CASA as well as clarify the incentives of the SME.  

Clarifying CASAs value proposition is very important because the programme asks SMEs to cost-share and to develop business plans that incorporate continuity of supply from smallholders.  ‘‘It takes time to change mind sets. This is especially more difficult when CASA asks partners to cost share to the business plan when other programmes may be giving handouts’’ says Ailsa.  

In a nutshell, the CASA programme is grounded in the theory of market systems development in order to deliver scale and sustainability of investments and financing. CASA aims to bring about systemic change by focusing on building capacity and making SMEs business-enabled in a robust manner.