Each market system in market systems development consists of three main components. These are: core market that connects the demand and the supply markets, supporting functions to support the transaction between those markets and rules they should follow. They form the so-called MSD doughnut through which all interventions are analyzed before they are implemented.
The cоrе market contains the supply side and the demand side. Both sides are observed separately, that is, who is on the supply side and who is on the demand side. The core market connects the two parties into one market – which is actually the market that the development systems implementer serves with the intervention. Starting from here, it is considered what are the needs of the market being served, where there are imperfections and why, if something can be done to improve the situation.
Supporting functions are: services, resources and infrastructure. Can the services offered be improved and how? Can more resources be offered if there is a shortage of them? How can the improvement of the infrastructure affect the improvement of the market served? Who are the key partners for the implementation of the intervention? Do they want to get involved and invest in the implementation of the intervention? These are just some of the questions that arise when analyzing whether an intervention would succeed.
In every market system there are rules that must be followed. During the implementation of the intervention, it is considered which are the rules and laws that should be respected. This way, the intervention itself is formed and the implementer takes care not to harm other market players in the economy, but rather work with them.
In order to understand what market systems development is, take a look at the video below.
Example of an MSD Doughnut
To make it easier to understand the MSD doughnut concept we will look at an example (original: Beam Exchange). The basic market is the market for obtaining clean drinking water. Its development depends on supporting functions and rules. A doughnut would look like this:
Sometimes, the MSD doughnut is useful to make to see if we are looking at the right market system. We may find that we need to bring some other market system into focus. For example, we can swap places on the clean drinking water market system and the tariff policy. Now we are getting a tariff policy as a focus and a market system that we will improve with the rest of the players in the economy, and clean drinking water is one of the rules that we will respect.
Source of information: Beam Exchange
Read the previous blog post The bigger picture behind Impact Foundation