SHiFT WORKING PAPER October 2022 Analytical Framework for Work Package 2 Micro, Small, and Medium Enterprises (MSMEs) and the Informal Sector Ezra Berkhout, Francisco Ceballos, Alan de Brauw, Mark Lundy, Marrit van den Berg, and Amanda Wyatt The CGIAR Research Initiative on Sustainable Healthy Diets through Food Systems Transformation (SHiFT) combines high-quality nutritional and social science research capacity with development partnerships to generate innovative, robust solutions that contribute to healthier, more sustainable dietary choices and consumption of sustainable healthy diets. We build on CGIAR’s unparalleled track record of agricultural research for development, including ten years of work on food systems and nutrition under the CGIAR Research Program on Agriculture for Nutrition and Health (A4NH), particularly under the research flagship Food Systems for Healthier Diets. To learn more about this Initiative, please visit on.cgiar.org/SHIFT. Suggested citation: Berkhout, E. et al. (2022). Analytical Framework for Work Package 2: Micro, Small, and Medium Enterprises and the Informal Sector. International Food Policy Research Institute. Washington, D.C., USA. 24 pages. Cover photo: Market stall in Ha Dong District, Viet Nam. Photo by Alan de Brauw, International Food Policy Research Institute. ii Table of contents Figures ................................................................................................................................................ iv Tables .................................................................................................................................................. iv Abstract ................................................................................................................................................ v Acknowledgments .............................................................................................................................. vi Abbreviations and acronyms ............................................................................................................ vii 1 Background and purpose of this paper ........................................................................................ 1 2 Introduction - from analytical to operational framework ............................................................. 2 Possible mechanisms delivering changes in consumption of SNFs .................................................. 3 Accounting for multiple objectives .................................................................................................... 4 Research activities ........................................................................................................................... 5 3 Emerging actor typology ............................................................................................................... 5 The relevant actors .......................................................................................................................... 5 1. Wholesalers .................................................................................................................... 5 2. Processors ..................................................................................................................... 6 3. School meal caterers/Institutional consumers ................................................................. 6 4. Restaurants .................................................................................................................... 6 5. Retailers/vendors/consumer cooperatives ...................................................................... 7 Defining characteristics .................................................................................................................... 7 4 Constraints and barriers that MSMEs face .................................................................................. 8 Priority setting ................................................................................................................................ 10 5 Research approach ...................................................................................................................... 11 References ......................................................................................................................................... 13 iii Figures Figure 1: Example of SHiFT WP2 timeline of activities and delivery of outputs for Viet Nam ..... 11 Tables Table 2: Common constrains and barriers facing MSMEs in LMICs and potential avenues to intervene............................................................................................................................................... 8 iv Abstract This paper develops an analytical framework for considering food systems interventions meant to increase the supply of sustainable nutritious foods in the food environment, to improve choices faced by consumers. The framework plays close attention to issues including employment among women and youth, and possible tradeoffs with measures of environmental sustainability. It will be used for developing interventions in the SHiFT research agenda. Keywords: Micro Small and Medium Enterprises, Informal Sector, Sustainable Healthy Diets, Food Systems v Acknowledgments This paper was written by Ezra Berkhout, Francisco Ceballos, Alan de Brauw, Mark Lundy, Marrit van den Berg, and Amanda Wyatt. The authors acknowledge the assistance of Thom Achterbosch, Irmgard Jordan, Daniel Mekonnen, Trang Nguyen, and Bart de Steenhuijsen Piters. This paper is part of a series of research outputs from SHiFT. We would like to thank all funders who support this research through their contributions to the CGIAR Trust Fund: www.cgiar.org/funders. About the authors Ezra Berkhout (ezra.berkhout@wur.nl) is a Senior Sustainable Food Systems Researcher at Wageningen Economic Research in Wageningen, the Netherlands. Francisco Ceballos (f.ceballos@cgiar.org) is a Research Fellow in the Markets, Trade, and Institutions Division at the International Food Policy Research Institute in Washington, D.C., USA. Alan de Brauw (a.debrauw@cgiar.org) is a Senior Research Fellow in the Markets, Trade, and Institutions Division at the International Food Policy Research Institute in Washington, D.C., USA. Mark Lundy (m.lundy@cgiar.org) is a Lever Director of Food Environment and Consumer Behavior at the Alliance of Bioversity and CIAT in Cali, Colombia. Marrit van den Berg (marrit.vandenberg@wur.nl) is an Associate Professor of Development Economics at Wageningen University and Research in Wageningen, the Netherlands. Amanda Wyatt (a.wyatt@cgiar.org) is a Senior Program Manager in the Poverty, Health, and Nutrition Division at the International Food Policy Research Institute in Washington, D.C., USA. vi Abbreviations and acronyms LMICs Low- and middle-income countries MSMEs Micro, small, and medium enterprises SHiFT Sustainable Healthy Diets through Food Systems Transformation SNFs Sustainable nutritious foods WP Work Package vii 1 Background and purpose of this paper Sustainable Healthy Diets through Food Systems Transformation (SHiFT) is one of the Research Initiatives in CGIAR’s new research portfolio. SHiFT’s main goal is to ensure sustainable healthy diets for all through food systems transformation, making it the only CGIAR Initiative with dietary goals as a primary focus. Starting from a consumer-focused perspective, SHiFT works on stimulating the demand for sustainable healthy diets and supporting micro, small, and medium enterprises (MSMEs) and informal sector actors to deliver more nutritious, safe, affordable, and sustainably produced foods (sustainable nutritious foods, or SNFs). At the same time, SHiFT’s engagement with stakeholders will generate evidence-based policy options, develops robust metrics and tools, and strengthens capacity to collectively catalyze food systems transformation in ways that also improve livelihoods, gender equity, and social inclusiveness. More specifically, SHiFT aims to generate new evidence on drivers of food consumption and on constraints to supply; identify and test scalable innovations and policies to stimulate consumption and supply; support the design and implementation of transformative policy option bundles; and strengthen the capacity of national and subnational stakeholders to guide food systems transformation. Box 1: Key definitions Sustainable healthy diet is a dietary pattern that promotes all dimensions of individuals’ health and wellbeing; has low environmental pressure and impact; is accessible, affordable, safe, and equitable; and is culturally acceptable (FAO & WHO 2019). Sustainable nutritious foods (SNFs) are foods that are necessary for a nutritious and healthy diet, which are key components of a sustainably healthy diet. SHiFT’s activities are carried out through five work packages (WPs). During the Initiative’s first three years (2022–2024), activities will be focused on Bangladesh, Ethiopia, and Vietnam. SHiFT’s work will expand to Benin, Guatemala, Honduras, India, and Senegal from 2025 to 2030. This paper presents the analytical framework for SHiFT’s research on Micro, Small, and Medium Enterprises (MSMEs) and the informal sector, pursued under Work Package 2 (WP2). To enable consumers to increase their consumption of SNFs, enough of these foods must be supplied to the food environment. Ensuring the availability and accessibility of SNFs, snacks, and beverages offered to consumers requires wholesalers, processors, caterers, and retailers to make key decisions about what to sell and how to sell them. WP2’s research will generate knowledge about the millions of MSMEs and informal actors in rural and urban areas around the world who make these decisions and will use that knowledge to identify and promote scalable, evidence-based innovations and policies to help those actors increase their delivery of SNFs while promoting more decent employment for youth, men, and women (ILO 2021). WP2’s work will inform SHiFT’s research on Consumers and their food environment, pursued under Work Package 1 (WP1), and vice versa. WP1’s research goal is to characterize food consumption and dietary patterns among marginalized populations (adolescent girls, in particular) and identify key drivers leading to poor diets and inequalities between men and women, as well as among other disadvantaged groups. The two WPs are designed to generate evidence about the food environment —the space in the broader food system where people acquire and consume foods— and generate solutions that stimulate the demand for/consumption of sustainable healthy diets and the supply of SNFs. As a result, 1 WP1 and WP2’s empirical research will be coordinated and conducted in the same sites in each target country. The present WP2 analytical framework provides the conceptual building blocks underpinning WP2 activities and serves as a beacon for the empirical research that WP2 will undertake. The purpose of this paper is to present the analytical framework, describe the logic behind it, and the process and expected applications in SHiFT’s research. The paper proceeds as follows: • Section 2 introduces the challenges WP2 will address, the assumptions behind how its research may influence changes, and its general research approach. • Section 3 lists and describes the common types of actors involved in food value chains and explains how this actor typology will be refined in each target country. • Section 4 presents a summary of a priori insights on the set of common constraints and barriers that MSMEs in low- and middle-income countries (LMICs) face and explains how a set of potential interventions aimed at reducing such constraints will be identified. • Section 5 presents a timeline for how WP2’s work will unfold in 2022 (SHiFT’s first year). 2 Introduction - from analytical to operational framework Food systems are not providing sustainable healthy diets for everyone, everywhere. Sustainable healthy diets promote human health and wellbeing, while limiting negative environmental, economic, and social impacts. To reach all the world’s people, these diets must be accessible, affordable, safe, equitable, and culturally acceptable. Currently, healthy diets are unaffordable for 3 billion people (FAO, IFAD, UNICEF, WHO, & WFP 2020). Poor-quality diets are associated with all forms of malnutrition—including undernutrition, micronutrient deficiencies, and overweight and obesity—as well as 11 million premature adult deaths each year (GBD 2017 Diet Collaborators 2019, Hawkes et al. 2020). Although food systems are an important source of employment in LMICs, many jobs are in the informal sector, where they offer low, uncertain income and poor labor conditions, especially for women and youth (Marschke & Vandergeest 2016, Riisgaard & Hammer 2011). Current food systems also significantly drive environmental degradation and biodiversity loss, and account for more than 25 percent of greenhouse gas emissions (Global Panel 2020). In both urban and rural areas of LMICs, diets are rapidly evolving as incomes, women’s employment, and urbanization continue to change, and as innovations occur in technology, food marketing, and public policy (Global Panel 2017, Popkin, Corvalan, & Grummer-Strawn 2020, Turner et al. 2018, Vermeulen et al. 2020). Food environments increasingly promote foods that are ready-to-eat, convenient, and cheap, but are often ultra-processed and too high in fat, sugar, and salt, making them unhealthy and unsustainable. Effective, research-based policy options are needed to build equitable and inclusive food systems that provide sustainable healthy diets for all (Imamura et al. 2015). The main goal of WP2’s research activities is to understand the channels by which MSMEs can work to increase the supply of SNFs in the food environment so that consumers can choose to consume a sustainable healthy diet.1 1 Examples of SNFs can include pulses and legumes, animal source foods, and fruits and vegetables, though it is important to consider the sustainability of each category and even foods within each of these broad categories. 2 A main assumption underlying WP2 is that more SNFs must be supplied to the food environment to enable consumers to increase their consumption. A second main assumption is that in LMICs targeted by SHiFT, MSMEs exist that would find supplying more SNFs profitable. WP2’s research will test the following broad set of assumptions: • MSMEs can respond to changing incentives. • MSMEs can deliver SNFs profitably and affordably. • MSMEs can provide decent employment. • Complementary interventions can support other positive changes in food environments, such as those related to environmental outcomes. Possible mechanisms delivering changes in consumption of SNFs While WP2’s focus is on increasing the availability of SNFs, the ultimate goal (and one of SHiFT’s overall objectives) is to increase the consumption of SNFs, thus contributing to healthier, more sustainable diets in target countries. Thus, we first build a generic understanding of how firms or MSMEs, broadly defined, can potentially increase the supply of SNFs, in a way that stimulates their consumption.2 Within WP2, we only consider the role of MSMEs and the effect of changes in their practices on retail prices, nutritional quality of their overall sales, and to the extent possible, the environmental footprint of those sales. At least three possible mechanisms for an increase in consumption of SNFs are identified: First, we consider price reductions for SNFs. In a standard economic framework, the consumption of a given product increases when the price for it declines. There are three ways that prices can decline. First, if aggregate supply increases, prices throughout the value chain could decline. Second, gains in efficiency among actors along the value chain, such as through institutional or technological innovations, can lower transaction costs and thus reduce mark-ups to the consumer. These innovations could include improved access to credit, new ways of digitizing transactions, or processing improvements. Both of these reductions could be mitigated by monopoly or oligopoly power, even locally, downstream from production along the value chain. Therefore, a third way that prices can decline is through reductions in market power. Again, institutional innovations could lead to firm entry at one node of a specific value chain (or multiple value chains), increasing competition and therefore reducing non-competitive mark-ups. Second, and closely related to point 1, overall consumption of SNFs can increase when firms enhance the nutritional quality of products, while holding their price constant. This could occur, for instance, if a drop in SNF prices allows processors, caterers, and restaurant-owners to use more SNFs in their product offerings. Specific technological innovations (e.g., improvements in processing or storage) could also allow these actors to offer more SNFs at a given price. Third, consumption of SNFs may rise due to a structural change in demand, where consumers demand more SNFs at a given price level. Standard economic theory suggests such an effect could occur due to income (consumers having more resources to spend) or substitution effects (when the relative price of SNFs goes down). Alternatively, consumption could rise due to changes in preferences, for instance, when education or marketing allows consumers to better appreciate the benefits of SNFs. 2 SHiFT’s definition of MSMEs closely follows the definition used by the International Labor Organization – micro-enterprises have 2 to 9 employees, small enterprises have 10 to 49 employees, and medium- sized/large enterprises have 50 or more employees – and expands the definition of micro-enterprises to include self-employment (e.g., businesses with no employees), (ILO 2021). 3 Of course, these mechanisms could be mutually re-enforcing. For instance, a structural change in demand may be accompanied by price reductions or improvements in nutritional quality. Finally, when any of the above result in substantial changes to demand or food availability, it is important to consider changes in the environmental footprint of the food system, such as total greenhouse gas emissions and/or water use. While SHiFT’s primary focus is to increase demand for and ensure a sufficient supply of nutritious foods, sustainability constitutes a key secondary objective, as we discuss in the next section. Accounting for multiple objectives While the initial focus of research in WP2 lies with increasing delivery (greater quantities, lower prices, better quality, or some combination thereof) of SNFs, an additional objective is to understand how the mid-stream sector of the food value chain can create more decent employment, with a particular focus on women and youth, and to understand specific gender-based barriers in doing so. A further objective is to understand if, how, and when more nutritious foods can also be environmentally sustainable. There are no a priori reasons to assume these objectives can and will always be met simultaneously. In fact, as a corollary to Tinbergen’s rule: only in rare instances does a single policy intervention lead to attaining multiple policy objectives. Alternatively, trade-offs in achieving these objectives may be common. For instance, whether a price decline due to an increase in economic efficiency leads to an increase in employment in this sector remains uncertain. A decline in prices could lead to a proportionally greater increase in consumption, raising overall activity for MSMEs and plausibly employment. But economic efficiency could also stem from adopting labor-saving technologies, or gains in efficiency by some actors could result in loss of business for less efficient competitors, resulting in an ambiguous impact on overall employment levels. Similarly, the dual objective of enhanced nutrition and environmental sustainability do not necessarily go hand in hand. For example, according to the EAT-Lancet Commission report the latter objective could be achieved through a shift towards plant-based diets (Willett et al. 2019). While this may be true in developed countries, where consumption of meat and dairy products is already high, in many LMICs encouraging higher consumption of animal products may be the most effective strategy from a health perspective. Moreover, increasing the supply of nutritious foods (while maintaining or improving food safety standards) can involve greater energy needs, with its accompanying increase in carbon footprint. On the other hand, the demand for nutrient-dense foods could be associated to their environmental sustainability, for instance when reductions in the use of chemicals (pesticides, herbicides) lead to changes in consumer perception around the health or even taste of SNFs. In other words, searching for, identifying, and testing an intervention that simultaneously tackles all these objectives could be challenging. We therefore propose a hierarchical approach, prioritizing the supply of nutritious foods, with employment or sustainability as secondary objectives. In other words, when two competing interventions are equally promising in terms of stimulating supply of nutritious foods, we will select the one with the greatest potential on employment or sustainability. All in all, the set-up is such that the impact on all of these objectives can be established, as well as tradeoffs (or synergies) between objectives. 4 Research activities WP2 is undertaking several research activities to identify scalable, evidence-based innovations and policies that can help MSMEs and informal sector actors increase their delivery of SNFs while promoting more decent employment for marginalized populations. This analytical framework represents the starting point for this set of activities, which will be followed by secondary data analysis, a large- scale quantitative survey, and selected food system case studies in the target countries. A subsequent step in the agenda is to construct typologies of the actors working in MSMEs and the informal sector in Box 2: Expected outputs from WP2 • Output 1: Typology of actors among MSME/informal wholesalers, processors, caterers, and retailers with the potential to deliver more SNFs. • Output 2: Evidence base of MSME-led innovations and scalable interventions overcoming gender-specific barriers limiting sustainable nutritious foods and maintaining/increasing decent employment. • Output 3: Stakeholder guidelines for facilitating youth and female employment in MSMEs and informal sector in the wholesale, processing, catering, and retailer sectors. target countries with the potential to deliver more SNFs or to facilitate their delivery (output 1). This typology, plus the results from the quantitative survey and case studies, will be used to identify and test a set of promising interventions that can potentially overcome constraints inhibiting the delivery of SNFs and maintain or increase decent employment for marginalized populations (output 2). To do so, WP2 will engage with groups of MSME actors in each target country to co-define the interventions. The lessons learnt throughout this process will serve to generate knowledge outputs to guide other stakeholders interested in facilitating decent employment for women and youth in the food system (output 3). 3 Emerging actor typology The relevant actors Identifying the most promising interventions for increasing the supply of SNF requires an understanding of the types of actors currently involved in the food environment. Since the food environment and the actors within it typically differ substantially between countries, we aim to establish a separate typology for each of the target countries. As a starting point, however, a preliminary list of five common types of actors is put forth: wholesalers, processors, school meal caterers, restaurants, and vendors/retailers/consumer cooperatives. We consider these in greater detail below, describing some of their key characteristics. 1. Wholesalers Wholesalers are businesses (including individual collectors and distributors) that source foods from primary producers and processors; aggregate and sort products for quality standards; transport and store products in warehouses; and sell primary products to processors, retailers, or restaurants. Potential interventions designed for wholesalers to increase the supply of SNFs would most likely aim at lowering prices paid by processors and retailers. 5 2. Processors Processors process primary products, sourced from primary producers or wholesalers, and subsequently supply consumers, vendors, restaurants, or caterers. This category may overlap with the latter three, as in many LMIC settings businesses are involved in processing and vending at the same time. Similarly, in many settings microbusinesses process (and sell) primary products, as a part of the livelihood strategy of primary producers. As a result, we expect to find substantial heterogeneity within this category. The majority of horticultural products, as a specific type of SNFs, are processed (if at all) and sold within a short distance of production zones. In the absence of cold storage, this distance is usually a direct function of the degree of perishability of different products. In some instances, these chains are characterized by a large number of processors purchasing small quantities in wholesale markets. Issues of (mis)trust between wholesalers and processors (or vendors) could further affect the efficiency of such chains. Finally, the supply of products by processors to retailers can be an important way that healthy foods make their way into the food environment. If wholesalers and processors neglect certain types of foods or are biased towards highly processed foods, this is likely to also contribute to poor diets. 3. School meal caterers/Institutional consumers With adolescents being the focus of WP1, it is important to consider schools as a key component of the food environment. In many LMIC settings, adolescents often (though not always) eat one or two meals per day at school on weekdays. In some settings, they may purchase snacks in front of the school gate. Ensuring that those meals are nutrient rich(er) is an important part of a strategy to enhance the delivery of SNFs. The structure of school meal “markets” is likely to differ substantially by country. For example, in Viet Nam private companies tend to supply meals to schools and are paid a fixed price per meal in return. There are strict guidelines on the types of meals that companies can provide (negotiated by schools) to build up menus; there are also guidelines provided by the National Institute of Nutrition (including an online meal building program). Yet, it is generally not clear (i) what students end up eating and (ii) whether the specified amount of each ingredient is actually provided (e.g., 40 grams of meat planned can be 30 grams on the tray). It also remains for investigation whether companies involved are MSMEs, or larger (i.e., whether these fit the target group for WP2 activities). In Ethiopia, school meals are an integral part of incentivizing students to be enrolled in school and may thus serve the role of food aid more than constitute a platform to have access to a healthy and sustainable diet. There is not yet a guideline for school meals composition nor a regulation for the school food environment. 4. Restaurants Restaurants can be thought of as including everything from hawkers who cook meals on the street (e.g. street food), to small independent shops, to more established restaurants and chains. By consequence, it is a considerably heterogeneous category. Some of these providers may now also sell food through businesses that deliver food to households (e.g. Grab, Shoppee, Deliver Addis, FoodPanda). As with schools, this type of actors will differ substantially by country. Hawkers and small independent shops may be of particular interest for this Work Package, since they are quite clearly MSMEs and are, on 6 one hand, a potentially important outlet for obtaining nutrient-dense foods while, on the other, a source of unhealthy foods (e.g., fried), with sometimes low food safety standards. In addition, such informal vendors may have fluid relationships with customers, which give them some agency over their food intake choices. They are less likely to work with nascent food delivery services as well. Likewise, outlets that provide semi-cooked or semi-prepared foods may be highly relevant for the urban or peri-urban poor, who may face time constraints to cook meals from scratch. 5. Retailers/vendors/consumer cooperatives Retail outlets sell fresh and unprocessed food directly to consumers. In some instances, the line between these and processors could be blurred when retailers further process foods (washing, cleaning, pre-cutting, prepared meals for home consumption). Retailers earn an income by putting a mark-up on a processed or unprocessed product. Within this category a great variety of outlets is likely to exist—from transient vendors, small-scale street stalls, or kiosks, to convenience type stores and supermarkets. The former two are quite likely to be micro-enterprises (maybe one employee), whereas some of the convenience stores and supermarkets can be small or medium enterprises, depending upon franchising, chains, etc. Defining characteristics As discussed above, some of these actor types overlap in practice, as some firms are involved in multiple activities at the same time. Hence, the list above should only be taken as indicative, with research activities aiming to establish better informed typologies relevant for a select group of SNFs. To the extent possible, the different typologies will be characterized based on each actor’s: • Role (trading, processing, cooking, sales, etc.) and position (relationship to suppliers and customers) in the value chain • Employment structure (# of staff employed, types of contracts (fixed or day labour), levels of informality, and reliance on household labour • Registered trade • Gender characteristics (women-led enterprises and share of male/female employees) • Location and geographical scope of business (rural, peri-urban, urban) • Specific niche of customers targeted, if applicable (e.g., poor, well-off, all) • Diversity of food products • Infrastructure availability – electricity, water, transportation, number of outlets • Engagement in "traders" union • Engagement in advertising or promotions The information generated under this step will reveal not only how the value chain for specific sustainable nutrition foods is organized (in terms of actors and their roles), but also how employment is distributed, and whether any specific gender differences emerge. For instance, are there specific activities in the value chain that are led by women (or men) only and why is this the case? And are there specific types of MSMEs or informal sector actors that have more potential to increase decent employment and incomes? 7 4 Constraints and barriers that MSMEs face Interventions are to be proposed for alleviating key constraints to the supply of SNFs for a specific actor type. Since the number of interventions that can be tested is limited, an informed choice is needed to determine \those that stand the greatest chance of improving the supply of SNFs. This requires a priori insights on the set of common constraints and barriers that MSMEs in LMICs face. A first exploration of these is provided in the list below, based on expert knowledge and a review of relevant literature (Table 1). The table provides a long list of key barriers in the food environment, as identified and addressed in earlier studies. Where possible, we indicate specific barriers to MSMEs’ supply of SNFs. The questions in italics present pointers for developing explorative qualitative survey questions to uncover whether particular barriers or constraints are more pressing for some actor types as compared with others. Importantly, some of these barriers could be gender-specific (when, as an example, female-owned MSMEs face constraints to accessing financial services, but not male-owned MSMEs). Table 1: Common constrains and barriers facing MSMEs in LMICs and potential avenues to intervene Emerging research questions / Barriers and constraints Potential avenues to intervene Structural barriers specific to SNFs • To what degree are the economics of trading/processing/selling SNFs less attractive than alternatives? • To what degree could (temporary) subsidisation play a role in changing relative prices and therefore demand? At what node further up the value chain for SNFs? The higher price of SNFs (and/or other product characteristics such • Could subsidies to school meal caterers or restaurants as perishability) may make trading, processing, or selling SNFs stimulate the inclusion of more nutritious ingredients to less financially attractive to MSMEs than less nutritious substitutes. existing recipes or substituting less nutritious ingredients for more nutritious ones? Or, could restaurants or school meal providers be incentivized to increase portion sizes for more nutritious meals relative to less nutritious ones, potentially spurring demand for these? • Could subsidies be offered to wholesalers, traders, or vendors to expand the offering of SNFs in their product portfolios? Subsidies for lowering price or expanding supply of SNFs • To what degree is the lack of education/awareness by consumers and/or vendors a major impediment to increasing the supply of SNFs? • Can specific interventions around knowledge or product marketing be designed to address such constraints? • Could more nutritious foods be more smartly marketed within Demand or supply for SNFs could be structurally low or depressed a store by placing it in more prominent spots? due to lack of awareness or knowledge of the beneficial qualities of • Could changes in labelling and packaging of SNFs enhance SNFs, possibly compounded by aggressive marketing for less sales? Products could be more clearly labelled as healthy (or nutritious products. not) and more sustainable (or not). • Is gender a relevant aspect when purchasing or selling SNFs? Improved product marketing Subsidies for product placement Education and awareness campaigns Visible labelling or improved packaging 8 Table 2 (continued) Emerging research questions / Barriers and constraints Potential avenues to intervene General institutional environment Informality and business size are viewed as being intrinsically related. The odds of a firm being informal typically reduces with its size. Whether firms choose to operate in the informal sector (when • To which degree is informality a hindrance or barrier that costs of formalization outweigh benefits) or formalize is an implicit or limits MSMEs in expanding the supply of SNFs? explicit choice shaped by the institutional context in which firms • What coping strategies do informal MSMEs have in operate. Relevant factors include legal and tax codes, degree of circumventing barriers due to informality (lack of access to enforcement, access to finance, availability of social safety nets, formal finance, formal support programs, etc.)? family care customs, among many others. • Which are the limits to these coping strategies? While informality may not be a major barrier to daily business activities, it could present a challenge for key interests of WP2 such as business expansion (e.g. increasing employment) or refocusing business activities (e.g. greater supply of nutritious foods), due to limited access to finance or support programs focusing on business Enabling legal and tax codes development. The distinction between formal and informal business Improving access to finance could be self-enforcing when small formal businesses face strong Promoting business development or formalization programs competition from informal businesses operating at lower cost-levels, further reducing the benefits from formalization. • Is the lack of entrepreneurial skills a particular constraint MSMEs are often hypothesized to lack entrepreneurial skills, limiting MSMEs in expanding the supply of SNFs? limiting growth, development and/or entry into new market opportunities. These have given rise to studies testing the impact of Promoting entrepreneurial training programs entrepreneurial training programs. Market functioning, trust, and information asymmetries There exists a burgeoning literature on constraints to finance and • Is access to finance a key constraint to the provision (or financial services faced by MSMEs. Access is constrained by expansion) of SNFs, for some or all actors, and could informality, lack of collateral, or both, despite perceived high returns conditional transfers/loans be an option to consider? to capital. Various microfinance interventions, cash transfers, in-kind • Is the lack of access to financial services particularly transfers, etc. have been tried and tested with differing results. Lack problematic to SNFs commerce and trade, and could of access to financial services implies limited access to payment providing access to such platforms allow for increasing solutions, potentially impacting sales. A nascent literature focuses on supply of SNFs? the role of fintech innovations, notably smartphone-based payment systems (Mpesa, Wave, Opay, etc.) in facilitating trade and Increasing access to microfinance commerce. Providing of cash or in-kind transfers Facilitating access to fintech or mobile money innovations Costs of recruiting and training staff by MSMEs, coupled with • Are recruiting and training costs or similar labour market uncertainties in growth prospects are potentially linked to lower than constraints/asymmetries a particular obstacle to expanding expected MSME employment creation. Wage subsidies and SNFs supply? Could conditional wage subsidies be an subsidized apprenticeships have been proposed and tested as avenue for increasing the offering of SNFs? means to reduce recruiting and training transaction costs for firms Providing wage subsidies and workers. Coordinating subsidized apprenticeships Actors face infrastructure and logistics constraints, including bad • Which are the most notable infrastructure and logistics roads, limited cold storage, lack of water and electricity connections, constraints limiting SNFs supply and how can these be that lead to high transport and storage costs and risk of food (quality) addressed in an intervention? losses, particularly in the case of perishable products. Such Infrastructure improvement programs for roads, cold storage constraints are binding for actors of different size, from large facilities, access to water and electricity warehouses to roadside vendors/retailers. Providing incentives or subsidies for adoption of small-scale cold storage equipment or other relevant infrastructure Most actors face information asymmetries with respect to the quality • To what degree do product quality issues play a role in of products they source, this may be particularly an issue with explaining sub-optimal delivery of SNFs by MSMEs? Can perishable SNFs and could further give rise to issues of mistrust suitable interventions be designed around these? between wholesalers, processors, and vendors. Labelling, certification 9 Table 2 (continued) Emerging research questions / Barriers and constraints Potential avenues to intervene Market functioning, trust, and information asymmetries Not sure if realistic interventions can be designed around this Various studies are suggestive of excessive market concentration issue, but various types of oligopolies in food markets are documented. It is important to understand potential tradeoffs amongst traders, and or coordinated price setting by traders, between market power and distribution costs, which are lower implying prices that remain artificially high for consumers. when similar businesses are geographically concentrated. • Are these inefficiencies present in the target countries? • Can these inefficiencies be overcome? What is the impact of some existing digital solutions providers (Ninjacart, Twiga) Market fragmentation (i.e. large number of MSMEs involved in that aim to target some of these inefficiencies? trading, processing, and vending) is hypothesized to be a major • When and how do these proposed solutions clash with barrier creating inefficiencies in the value chain of SNFs (high prices, employment goals, particularly for women and youth? low volumes, and uneven quality) Improving access to digital platforms for market access and finance Specific barriers (or opportunities) affecting school meal providers for raising the supply of SNFs include: • To which degree do these constraints limit school meal • Lack of clear guidelines and regulations around nutritional providers in increasing delivery of SNFs? targets and food sourcing • Are there constraints preventing the use of locally-produced • Limited consideration of local nuances around food availability ingredients for school meals, e.g. labelling constraints? and eating habits • Weak demand: Parents have a low willingness to pay for school meals in general (due, e.g., to negative attitude towards school meals) Providing enhanced, localized guidelines for school meal providers • Inefficiencies in procurement, lack of sufficient volume in their Tackling inefficiencies in food sourcing sourcing which would allow them to reduce costs by providing more uniform meal offerings across clients Priority setting Three sets of research activities —typology development, a large-scale quantitative survey, and detailed case studies— will help narrow down the list from the table above and move towards a reduced set of interventions that are the most promising or have the largest potential for fulfilling WP2’s objectives. This process will include groups of MSME actors and other relevant stakeholders to co- define the interventions. The prioritization process will include identifying the most relevant barriers (and interventions) according to the following principles: • Eliminate barriers that are outside of the scope of this study (i.e. those stemming from deeper institutional limitations that SHiFT cannot address); • Prioritize barriers related to actor types associated with either large volumes of food (which could potentially induce the greatest effect on prices) or reaching the largest number of consumers; • All other things being equal, prioritize interventions for actor types that cumulatively have the greatest number of women and youth employed (under the assumption that these would represent the larger potential for increasing employment) • Finally, there may be a need to consider multiple interventions jointly (i.e. a need for public coordination), in the case where solving one issue for one actor type would only be worthwhile when simultaneously solving another issue upstream or downstream for another actor type. 10 5 Research approach This report has described the analytical framework for WP2 and how the work will proceed through a series of activities to build up a typology and identify, design, and test a set of potential interventions tailored to specific types of MSME actors in the target countries. Figure 1 illustrates the timeline of activities and delivery of outputs expected for Viet Nam, which is where the work will first begin. This section describes what steps will be taken to achieve the ultimate goal of scalable, evidence-based innovations and policies to help MSME and informal sector actors increase their delivery of SNFs while promoting more decent employment for marginalized populations. Figure 1: Example of SHiFT WP2 timeline of activities and delivery of outputs for Viet Nam Complementary research in WP1 will aim to understand the relative importance of these actors as food suppliers in the current food environment, with a particular focus on those used by low-income households with resident adolescents. This research activity will also aid focusing research in this Work Package. More details can be found in the individual research protocols for WP1 and WP2. 1. Identify the three study sites and sampling frame for the quantitative surveys (food vendor census and survey for a random sample) in collaboration with WP1. 2. Collect insights into SNFs consumption in the three study sites, initially relying on secondary sources and later on primary data from WP1. 3. Identify the key actor types (i.e. subcategories of actors within the broad types listed above in Section 3) involved in the trading, processing, and selling of SNFs. 4. Understand the key constraints that inhibit these MSME actor types from expanding or improving, as well as opportunities for scaling. 5. Develop case studies to complement the quantitative survey, with qualitative studies focusing on uncovering the MSME landscape, modes and motivation of doing business, and institutional 11 structures that shape day-to-day activities of MSMEs; and barriers/constraints to provision of SNFs. 6. Use the data collected under 4 and 5, together with this document, to identify the most pressing constraints limiting SNFs supply (and employment growth). 7. Prioritise innovations and/or policies based on constraint identification and begin testing interventions. Associated impact assessments will track changes in the supply of SNFs and employment. The impact of the interventions on select environmental indicators will also be assessed ex-post. 12 References FAO, IFAD, UNICEF, WHO, & WFP. (2020). The State of Food Security and Nutrition in the World: Transforming Food Systems for Affordable Healthy Diets. Rome: Food and Agriculture Organization of the United Nations (FAO). https://www.fao.org/3/ca9692en/online/ca9692en.html. FAO & WHO. (2019). Sustainable Healthy Diets – Guiding Principles. Rome: Food and Agriculture Organization of the United Nations (FAO). https://www.fao.org/3/ca6640en/ca6640en.pdf. GBD 2017 Diet Collaborators. (2019.) 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The Lancet, 393(10170), 447-492. https://doi.org/10.1016/S0140-6736(18)31788-4. 14 This work is part of the CGIAR Research Initiative on Sustainable Healthy Diets through Food Systems Transformation (SHiFT). This research is being implemented by CGIAR researchers from the International Food Policy Research Institute (IFPRI), the Alliance of Bioversity International and the International Center for Tropical Agriculture (the Alliance), and the International Potato Center (CIP) in close partnership with Wageningen University and Research (WUR). IFPRI and the Alliance, two CGIAR Centers, and WUR, all participating in SHiFT, prepared this publication. We would like to thank all funders who supported this research through their contributions to the CGIAR Trust Fund: https://www.cgiar.org/funders/. This is publication has not been peer reviewed. Any opinions stated herein are those of the author(s) and not necessarily representative of or endorsed by CGIAR or IFPRI, the Alliance, or WUR. 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