Page 236 - DMGT509_RURAL MARKETING

Unit 12: Principle of Innovation

It is supported and facilitated by Deutscher Kaffeeverband and GTZ (www.sustainable-coffee.net). Notes

Task Discuss the role of Government in encouraging Rural Marketing.

12.4 Advantages and Disadvantages of NGO Involvement in Markets

There have been some notable successes resulting from NGO activities. Fair trade is a niche
market but is expanding rapidly. Independent assessments have shown evidence of benefits to
producers for example to coffee growers in Bolivia, Brazil, Costa Rica and Mexico (CI/IIED 2006).
The provision of credit through microfinance is another area of success. NGOs have raised the
profile of small producers in international advocacy while at a more practical level have helped
to fill gaps in support. In the literature on NGOs it is argued that NGOs can be cost-effective
because the altruism of NGO staff, motivated by the organisation’s mission rather than financial
gain, could imply lower labour costs or higher quality, than for a comparable private firm (Scott
and Hopkins 1999). NGOs have greater potential for innovation and flexible responses to
changing external pressures (Najam, 1999).
However, concerns are often raised about NGO involvement in markets relating to lack of
financial and institutional sustainability. What happens when the NGO withdraws financial and
other support and are independent local enterprises crowded out in the process? These concerns
could equally apply to activities promoted by governments or donors and are not inherent to
NGOs.
Another concern is the potential conflict between the business goal and the social development
goals. It is usually easier to develop viable market activities with the not-so-poor than with the
poorest and most vulnerable who cannot take any major risks. More generally, can niche market
successes be replicated on a larger scale or does this success reflect local conditions such as a pre-
existing community organisation. Finally it could be argued that by concentrating on small
groups of producers in niche markets, there is a danger of distracting efforts of NGOs and other
stakeholders from the more fundamental changes needed in trading regimes and business
environments.

Suggested Areas for Discussion

Maryanne concluded by setting out some key issues for discussion.
1. What roles can NGOs play most effectively in markets?

(a) From facilitation to establishing social enterprise trading
(b) What is the comparative advantage of NGOs?
(c) What is appropriate mix of service provision and advocacy
2. Replication of success:
(a) What are the constraints and how can they be overcome?

3. Policy frameworks (NGO, donor and public policy):
(a) What changes are needed for greater NGO effectiveness in markets?

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