Value chain analysis and poverty reduction at scale

Briefing papers
March 2009
Jonathan Mitchell and Caroline Ashley

This Briefing Paper looks at how markets can be made to work for the poor, building on experience in the tourism sector to unblock access to profitable market opportunities.

The need – and opportunity – to harness markets for poverty reduction is evident in tourism. Developing countries are littered with well-intentioned community-based tourism projects, delivering small benefits to few people. Developed in isolation from commercial distribution channels, they lack the client volumes needed for commercial sustainability. In contrast, Ministries of Tourism and mainstream businesses often see increased arrival numbers as the barometer of success. Research by ODI suggests that neither approach is right, but tourism markets can – in some cases – be exploited for the benefit of the poor.

The ‘pro-poor value chain’ approach to tourism has been developed by ODI, the International Finance Corporation (IFC), and the Netherlands Development Organisation (SNV), as a way to shift thinking from projects to interventions that harness markets and deliver impact at scale. By ‘value chain’ we mean the full range of activities that are required to bring a tourist to a destination and provide all the necessary services (accommodation, catering, retail, excursions, etc.).

The approach ‘follows the dollar’, focusing on key points along the chain where interventions could expand income opportunities for the poor, within a commercial service sector. ‘Pro poor income’ (PPI) is the wages and profits earned by poor households across all the inter-related strands of the value chain. The aim is to support market-based interventions by analysing how poor target groups currently engage, how their positions can be upgraded, and how changes in value chain performance would affect them.

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