Market Creation Approach to poverty alleviation

The majority of India's poorest people are subsistence farmers with small land holdings, typically less than two hectares. IDE's approach to poverty alleviation and rural development is to put income-generating technologies into the hands of the rural poor families.

To accomplish this, IDE stimulates the local private sector to i) consider poor farmers as a viable market and ii) provide them with productivity-enhancing tools at a price that is affordable yet fair to manufacturers and distributors.

Traditionally, poor farmers have been ill served or ignored as a market segment on the assumption that they have no money to spend. IDE's experience worldwide, however, has been that even very poor farmers do have a little money to spend but lack appropriate investment opportunities. With the right products-appropriately sized, priced, and marketed-the private sector can deliver income-generating technologies to small farmers in a sustainable "win-win" relationship. The private marketplace is arguably the most efficient mechanism for widespread distribution of a technology to maximise coverage and impact.

IDE's technical expertise lies in improving agricultural efficiency through technological innovation. Small-scale irrigation systems play an important part in IDE's approach.

Since the technologies are disseminated through the open market, they are available to anyone who is willing to pay. The characteristics of the technologies, however, make them particularly attractive to small-scale farmers; they are low-cost, manually powered, appropriate for small landholdings, and have a high rate of return. IDE strives to make the technologies accessible to even the poorest farmers by addressing the following factors:

• Product: IDE identifies and develops appropriate technologies that help small farmers overcome agricultural constraints. The technologies are field tested by small farmers and adapted to local conditions to ensure appropriateness, effectiveness, and a high rate of return on investment.

• Price: every effort is made to design and produce a technology that is affordable for as many small farmers as possible. Price competition is encouraged through the establishment of multiple manufacturers and distributors. IDE also works with agencies that provide access to affordable credit for the poorest farmers.

• Demand: IDE stimulates demand for the technology in rural areas by raising awareness through demonstration plots, promotional activities, and marketing campaigns.

• Availability: a private-sector supply chain (manufacturers, distributors, retailers, and installers) is established, equipped, and encouraged by IDE through research and development, training, quality control, and logistical support. The manufacturing and distribution system is decentralised to make the technology more easily available in remote locations.

• Sustainability: the process is designed to be sustainable in the long-term by ensuring that the technology satisfies a real need, local demand is met using local resources, and each person in the distribution chain-from the manufacturer to the farmer-benefits financially.

Donor funds are used to lay the groundwork for a sustainable free-market system. The creation of a market for a new and innovative technology requires certain high-cost investments up-front: product development, capacity building in the private-sector supply chain, and intensive marketing during the product introduction to build a critical mass of awareness and demand.

Donors bear these initial costs, which could never be borne by small-scale entrepreneurs individually.

IDE's approach leads to the creation of entirely new markets. Products that did not exist previously are manufactured and sold, generating new income for the supply chain members. The products are purchased by the rural poor and used to improve production and increase income from existing resources. The result is true wealth creation (as opposed to wealth redistribution) with benefits accruing directly to the rural poor.

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