Partnerships for institutional development - Think big, start small

Though the role of institutions in fostering economic transformation and development is widely acknowledged, an increasing focus has been on the politics behind institutional change. In Dani Rodrik’s words, “issues of governance, politics, and power are no longer a sideshow; they constitute a central element in the field.” While the political dimension of institutional change is increasingly taken into account by policy-makers through political economy analysis, it remains a challenge for donors to engage with local institutions and government and thus far has mainly been seen as a contextual element for multi-stakeholder partnerships. As a result, we often see regulated markets where standards are not implemented because of the lack of interests from local institutions and/or actors. Rather than trying to addressing this through traditional technical assistance to governments, multi-stakeholder partnerships may offer an alternative way to bring about change. The link between multi-stakeholder partnerships’ context and their impacts is often underestimated and overlooked. According to Ros Tennyson, “partnerships are extraordinarily vulnerable to context and this is often overlooked in the focus on being ‘global’.” If geography history and cultures matter, the key contextual factors affecting partnership are the economic, political and societal institutions (PEP, 2016). But this influence goes two ways: while hugely affected by institutions, multi-stakeholder partnerships may also offer a way to  promote an institutional change. Current ECDPM research on CSO-business partnerships led us to come in contact with the SNV innovation fund. The fund offers an interesting alternative to working around institutions in the dairy sector in Kenya. By partnering with, and using local private sector interests, they aim to tackle the institutional blockages that are at the heart of the dairy sector’s systemic weaknesses. This way, the partnership is contributing to providing a bottom-up approach to addressing systemic issues in a complex institutional environment.

Institutional change starts from the bottom

In 2012, SNV launched the Kenya Market-Led Dairy Programme, supported by the Dutch Embassy in Nairobi, to foster a vibrant, private-sector-led, dairy sector. This included an innovation fund to encourage private sector actors to fast-track commercially viable innovations to tackle the dairy sector’s challenges. Milk quality produced by smallholders is one of these challenges and is a great concern for the dairy industry and consumers: on top of harming consumers’ health, it prevents the Kenyan dairy industry to exploit the growing demand for good-quality milk in the domestic and East-African markets. It is also extremely complex, requiring well-functioning quality and standards authorities, inspections, enforcement and also assistance to help producers reach the standards in the first place. Although some initiatives were launched (from 2007 to 2011), new dairy regulations, training Kenyan Dairy Board regulatory dairy inspectors, delivery of a Good Manufacturing Practice training programme, and designing a Quality Based Milk Payment (QMBP) system – which was not implemented –, very little has changed in practice. Through consultation with Kenyan dairy industry actors, and instead of providing further technical assistance to public institutions, SNV helped to set up the innovation fund mentioned above. SNV accepted the funding the proposal of a processor, which aimed to improve its milk quality, by developing a QBMP system for smallholder dairy farmers. That’s how the partnership started. Table: How the SNV partnership works.

Why partnering?

This CSO-business partnership allowed a win-win situation: if successful the processor will expand its activities, creating employment both directly and indirectly, while showing  that such a payment system is working and has a great potential in Kenya and East-Africa. This will then likely push other private sector actors to improve their milk quality – transforming a problem into a business opportunity. It will also push institutions to remove the barriers that private sector actors face when dealing with such issue to foster the dairy sector development. In this case, a partnership between CSOs and businesses may be a useful tool combining different actors’ interests and objectives to contribute (incrementally) to a institutional change. Another factor contributing to the effectiveness of the partnership is its embeddedness in the dairy industry. The processor and SNV were never disconnected from their dairy networks: they regularly updated partners and institutions on their progress, showing openly the challenges they were facing; emphasising the final objective that groups every actor (to develop a sustainable dairy sector) and building trust with stakeholders. In the words of Drost et. al, “[a] strong and committed business leader who can act as primus inter pares has the capacity to convince the partners and to organize the chain into a more powerful sector.” Today, the attitudes of the private sector and institutions on the milk quality issue have slowly changed and they now consider it for their own interests. Milk quality is among the priorities of the main dairy institution, and the private sector is moving their thinking from why to how they can improve milk quality. This not to ignore the ongoing challenges the partnership faces in an evolving highly politically-sensitive sector.

The power of partnerships

Instead of pushing for further market regulations which are anyway rarely enforced, it seems that SNV found an interesting alternative to contributing to institutional change. The partnership between CSOs and the private sector has been useful in catalysing private sector efforts and ambitions to develop and remove institutional barriers from the dairy sector. In this sense, it has proven to be a transformational  tool, if used in the right conditions. Therefore, SNV moved the debate from what institutions should do to what local actors, including the private sector, can do to foster effective institutional change and economic transformation. The views expressed here are those of the author and not necessarily those of ECDPM. In addition to the Department for International Development (DFID),United Kingdom funding, this publication benefits from structural support by ECDPM’s institutional partners Austria, Belgium, Denmark, Finland, Ireland, Luxembourg, The Netherlands, Portugal, Sweden and Switzerland.