Aid is fundamentally a transfer of resources: finance, infrastructure, knowledge, technology, medicine, food and more. For decades, the dominant model has been direct delivery: plug the gap. And the formula for greater impact has been simple – spend more.
Critics argue that this direct delivery approach has flaws. Outcomes often don’t last after aid funding ends – or they don’t achieve scale for want of on-going resources. ‘Big aid’ displaces local initiative, ownership and institutions – rather than building effective and resilient local systems. Development processes are driven by the guys with the biggest cheque books, aid agencies – creating a pernicious dependency. The ‘localisation’ agenda emerged from this critique, as has the push for more systemic approaches to development assistance.
A systemic change approach tackles the root causes of underdevelopment by shifting incentives, relationships and structures within socio-economic systems, catalysing sustainable, large-scale change led by local actors. It doesn’t deliver solutions directly but works through existing systems. A commonly applied systemic approach is market systems development or MSD (see box below).
The aid cuts of 2025 have exposed the limitations of the direct delivery model: less funding means less development, we are told. But is there an opportunity in this crisis? Could it push the aid sector towards something more effective: aid defined not by how much is spent, but by how change is achieved? If necessity is the mother of invention, could less aid mean smarter aid?
Here’s how a systemic change approach like MSD can help achieve smarter aid:
A systemic approach reduces the need for costly direct interventions by investing with and working through existing local actors (firms, government agencies, etc). This reduces dependency on aid budgets while still achieving large-scale impact through co-investment and shared incentives. Successful MSD projects have seen market partners invest three dollars for every dollar the programme spends. More bang for your buck, as the expression goes.
Working with ecosystems support organisations, Swisscontact have helped entrepreneurs to mobilise CHF 617 million of capital over the past 10 years.
Rather than funding solutions indefinitely, a systemic change approach strengthens local systems with the explicit aim of making outcomes resilient after development funding stops. An MSD programme considers its exit strategy before it even enters a system. This is attractive in times of fiscal constraint, when funders are pressured to show enduring impact. More importantly, development solutions are more likely to be relevant to local contexts because they are driven and owned by local actors from the outset. It’s their agenda, not ours.
Swisscontact’s work in the remote Char regions of Bangladesh has empowered local communities and over 1,500 home-grown service providers to independently coordinate inputs, finance and market linkages benefitting 115,500 households and enabling 35,000 farmers to adopt climate-smart practices
With tighter budgets, aid’s focus must be sharper. A systemic change approach is data driven, using diagnostic tools and action research to identify the most feasible prospects for achieving impact and leveraging co-investment. Robust real-time measurement permits rapid correction of underperformance or reallocation of resources to better prospects. This avoids spreading aid too thinly – or propping up failures.
A systemic change approach acknowledges, like the military maxim, that no plan survives first contact with reality. The approach is designed to be flexible, recognising that the world is messy and unpredictable. This is a strength when donor priorities or circumstances shift, allowing implementers to pivot without rebuilding from scratch. MSD programmes have continued to be effective when countries have been hit by crises like COVID-19, African Swine Fever, economic and political collapse, natural disaster and conflict. Others are successfully responding to the emerging challenges of climate change. Adaptive management is key to effectiveness and efficiency.
Rather than lobbying for reform directly to government, sweetened with promises of funding, a systemic change approach influences policy and regulatory change by using evidence and by building coalitions. Diagnosis generates new insights. Co-investing with market actors demonstrates better solutions. Working through local market actors builds champions for change who have more access to government and are more credible advocates for change than an aid project. This helps an MSD programme maintain politically neutrality, which will be critical as geopolitical pressures increasingly shape aid flows. It recognises that aid can be more effective if it is humble and seeks to “influence the influencers” rather than lobbying directly.
This work can be seen across Swisscontact’s portfolio. For example, their work has enabled credible, empowered local actors to roll out open banking regulations in Guatemala and improved urban planning processes in Bangladesh. In Fiji, support has helped establish a competitive outsourcing services industry that contributes over 2% to GDP and 5% of formal urban jobs, 70% of which are held by women.
Public aid cuts are attracting the headlines but new private types of aid like blended finance, impact investment and corporate and private philanthropy are increasing dramatically. A systemic change approach is suited to these new modalities because it focuses on shaping incentives, reducing risk and aligning private and public interests – core aims of these new modalities. In fact, it can enhance them by making capital smarter, partnerships more strategic and outcomes more resilient:
As conventional aid contracts and new types of aid emerge, a systemic change approach isn’t just relevant, it might be essential. It enables development actors to do more with less, not by stretching budgets, but by changing how change happens.
MSD combines strategic intent with pragmatic, flexible implementation. Its goal is to make socio-economic systems more effective, competitive, inclusive and resilient. It applies rigorous analysis to identify feasible opportunities for change, then co-invests with local actors to test and scale solutions. Like an investor, it employs a portfolio approach to manage a diverse set of interventions as a cohesive whole, balancing risk, return and impact to adaptively achieve systemic change at scale. It uses financial and non-financial tools to reduce risk and stimulate investment. Robust measurement underpins the approach.
A system can be a sector (e.g. tourism), a value or supply chain (e.g. specialty coffee or rooftop solar) or a market segment (e.g. sanitation for low-income households or vocational education for urban youth). It is not fully commercial but includes a range of public and private actors whose functions shape how goods and services are produced and consumed.
Since emerging in the early 2000s, MSD has been applied successfully in agriculture, manufacturing, services, finance, education, water, sanitation and health – across diverse contexts, from large emerging economies in Asia to small island states in the Pacific and fragile, crisis-affected settings.
Swisscontact and the Springfield Centre have played leading roles in developing and applying systemic approaches for three decades.