Thematic Case

Overall Programme

How Liway used a market systems approach to adjust policy in a ‘developmental state’

For most of the period since 1991, Ethiopia can be considered to have been a developmental state, in that the government has played a significant role in most aspects of the economy and has done so with a view to growth, development and poverty reduction. Recently failures in the distributional element of the developmental state have played a key role in political transitions; paradigms have begun to be challenged but the government remains integrally involved in most aspects of the economy.

In a country where the private sector freedom remains constrained, where the multidimensional poverty rate is almost 70% of the population, with 87% vulnerable to poverty, change for low-income market segments can only happen with the consent, if not the executive involvement of the government.

LIWAY was designed in the areas it was felt would be most transformative, and were currently most neglected, for young, urban, poor people with a particular focus on women. The organisation of the programme around the principal ways in which this group can earn money in a complex urban economy – starting and growing their own business, engaging in formal waged employment, and engaging in more informal labour markets, all underpinned by improving the skills with which they are able to engage in these livelihoods – aligned perfectly with government priorities.

However, the impediments to the more effective functioning of these economic systems were many, and many of them were partly attributable to the challenges created by a large, complex, and under-resourced state. The Ethiopian government was, then, both part of the problem and likely part of the solution.

Many MSD programmes prefer to engage with the more transparent incentives of the private sector. In some contexts, this is an effective and quicker pathway to impact. But for this market segment, in Ethiopia, it is unlikely to be effective. As such, LIWAY decided to purposefully and proactively target policy change and has had huge success in doing so across its focal systems.

This case aims to share lessons as to how this success was achieved by pulling a range of policy levers. It provides detailed examples of four success factors:

  • Work outside government to build evidence and momentum
  • Following momentum and finding the most powerful actors
  • Developing strong relationships
  • Deploying the right tactics at the right time using the full MSD toolkit

While the potential for (or indeed necessity of) such changes will vary by context, particularly according to the involvement of the government in different economic areas, this case demonstrates how an MSD approach can be highly effective in achieving policy change and how the government can be a key avenue for achieving scale.