Operationalising Graduation and Market Systems Development integration in refugee settings: lessons from Uganda

The Graduation Approach and Market Systems Development (MSD) offer powerful frameworks for lifting vulnerable communities out of poverty, but in refugee settings, neither approach alone may be enough.

Displacement-related challenges—such as limited infrastructure, land tenure complexities, and shifting market dynamics—can hinder long-term sustainability. To bridge this gap, the SMILES project in Uganda’s Kyaka II and Kyangwali Refugee Settlements in Kyegegwa and Kikuube Districts respectively is pioneering an integrated model that combines Graduation and MSD, ensuring that extremely poor refugee and host communities move beyond short-term assistance towards self-reliance.

This blog, part of our SMILES Learning series, focuses on the process of operationalising this integration. By drawing from our experience in Uganda, we explore key strategies for aligning the Graduation Approach with MSD partnerships for the agriculture input and output, energy, and financial services sectors. We highlight the critical role of private sector engagement in sustaining economic opportunities—demonstrating how businesses, in partnership with development actors, can drive systemic change even in some of the world’s most complex environments.

Co-designing for last mile impact: bringing private sector actors into the field

A core principle of MSD is co-designing interventions with private sector actors (PSAs). Co-design is a structured process of co-creating sustainable business models in collaboration with PSAs, government agencies, NGOs, development partners, and end-users. The objective is to develop a shared vision of how a specific business model should function to address systemic market constraints. While many agribusinesses in Uganda are accustomed to operating in challenging environments, refugee settlements present unique logistical and economic dynamics that need to be addressed intentionally during co-design. 

On the SMILES project, PSAs initially underestimated the distances between households and poor road conditions, which meant they had to adjust their staffing plans and hire more extension officers or agents than originally anticipated. To address this challenge and others, we recommend early field visits during co-design with PSAs. These visits helped them understand factors such as land size, road conditions, population distribution, and local market structures firsthand. During these site visits, the PSAs can leverage the expertise and approach of the SMILES project field staff to navigate complex socio-political dynamics, including cultural diversity, land tenure, language differences, individual trauma, and a transient population. 

Another valuable approach has been periodic joint monitoring visits between the SMILES project and PSA staff. These one-day visits to field operations support adaptive management and include discussions with PSA staff and agents, farmer groups, agri-dealers, and demonstration garden leads. They provide a platform for real-time problem-solving and build trust between PSAs and the SMILES project to support long-term market development in refugee settlements. For example, a joint monitoring visit with an energy actor revealed issues with creating sustainable demand for clean cookstoves. The current business model relied on one-off purchases directly by the end user which was not sufficient to build sustainable demand. Instead, the PSA and the SMILES project staff worked together to adapt the business model focusing on creating a reliable vendor network supported by advertisements and cooking demonstrations to increase demand. One of the challenges that vendors face is limited cash flow which prevents them from making up front purchases of the cookstoves to stock their shops. The SMILES project worked with the PSA to finance up-front procurement and delivery of cookstoves with vendors conducting repayment after sale to the end user. At this point, the vendor has a more established relationship with both the end user and the supplier, facilitating long term sustainability and availability of cookstoves in the region. 

For projects that integrate MSD with the Graduation approach, strong coordination between these two pillars is essential. PSAs should work closely with Graduation coaches and Community-based Trainers (CBTs) to ensure that interventions align with the evolving needs of communities. Continuous team capacity building for both the Graduation and MSD Approaches is necessary to foster cross-functional project teams. 

Graduation coaches and CBTs—often recruited from within the community—bring a deep understanding of the political and social dynamics at play in refugee settlements and surrounding areas. Enabling direct communication between PSAs and these field teams helps PSAs navigate local sensitivities, avoid missteps, and make more informed decisions. While major issues may still be escalated to headquarters, fostering on-the-ground collaboration can make a significant difference in project effectiveness. However, we do caution that project teams find the right balance between adaptive continuous management and ad hoc communication that overburdens the PSA.

Graduation and MSD activities should be jointly planned on a quarterly basis at the field levels to ensure that interventions are complementary rather than operating in silos. This means synchronising seasonal activities (such as input distribution, production cycles, and market linkages/buybacks) to align with the livelihood targets and timelines of the Graduation Approach. For example, the Graduation Approach includes coaching participants to prepare them to invest a financial asset into a business of their choice (called Enterprise Selection Planning and Management). PSAs should be actively engaged during this training, especially where households may choose to invest in value chains supported by partner PSAs. 

The SMILES project partnership with PSAs applies a milestone-based payment schedule whereby PSAs receive payment upon completion of agreed outputs or achieving specified targets. Initially, the SMILES project designed PSA partnerships with payment milestones linked to minimum buy-back volumes from the SMILES households. Through this process, we learnt that setting volume targets for produce buy-back from selected extremely poor households is not an effective way to promote sustainability of PSA interventions. Due to factors such as fluctuating demand and unpredictable weather, early harvests often did not meet the required quality or quantity for buy-back. This was not always indicative of a PSA failing to invest in the community but provided an important baseline for adaptations implemented in later seasons.

Instead of enforcing strict buy-back requirements, we found that a more flexible approach works better. Partnership agreements with PSAs should still include targets for buy-back as part of monitoring and evaluation but partner payment should not be contingent upon partners achieving buy-back targets in the first seasons. Introducing stretch targets for buy-back—where PSAs receive an additional payment for exceeding a benchmark—can incentivise year-on-year growth while still being responsive to market fluctuations. Rather than rigid procurement commitments, the focus should be on gradually expanding the buyer-supplier relationships between the targeted extremely poor households supported by Graduation activities and PSAs to foster long-term improvements in quality and quantity.

PSA-led demonstration gardens play a crucial role in agricultural training, but their success depends on understanding local land ownership structures. In and around refugee settlements, land tenure is often contested, making careful planning essential.

Graduation and MSD projects should work with PSAs to determine the most suitable demonstration garden model. Hosting gardens on individually owned land is often the most accessible option, as landowners may be willing to allocate space. However, this can cause tensions if group members contribute labour without directly benefiting from the land’s profits. On the other hand, group-owned land promotes shared ownership but can lead to disputes over labour contributions and revenue-sharing. Regardless of which hosting structure selected, projects need to be intentional about profit-sharing arrangements ensuring that groups agree on how proceeds from the demonstration garden will be shared fairly to avoid future conflicts. 

The key to success is clear, up-front communication. Ensuring that all participants understand the expectations, roles, and benefits of demonstration gardens can help prevent conflicts and encourage meaningful engagement. In refugee hosting contexts, Graduation and MSD projects can also help PSAs navigate complex land approvals and governance which may disincentivise PSAs from entering the region on their own. 

Agricultural investments in refugee-hosting areas often require a longer timeline to become profitable than other non-refugee hosting regions. These markets are nascent and require more investment—PSAs must build trust with farmers over multiple seasons demonstrating how their products improve quality and quantity of produce to overcome dependency on free donor-provided agriculture inputs. During initial co-design with agriculture partners, we targeted two-year co-investments before PSAs would have the buyer-supplier relationships developed enough to no longer rely on the SMILES project support. However, our experience shows that in refugee settings, this timeline should be extended to at least three years (or six farming seasons in the case of selected Ugandan staple and horticulture crops). Projects must account for this extended period when structuring investments and setting partnership expectations with the understanding that the PSA partner is only one part of the project’s effort to develop the larger market system.

A strong Graduation and MSD project can drive change that goes beyond immediate humanitarian relief and creates lasting impact. Graduation activities focus on household level ability to participate in markets while MSD addresses systemic constraints that prevent households from accessing market opportunities. The lessons from SMILES illustrate that even in the most challenging environments, private sector engagement can be a powerful force for sustainable development, offering people the dignity of self-sufficiency and the opportunity for a better future. Over 5,600 SMILES project households have accessed quality inputs as of February 2025 compared to about 1,100 households at the project start in August 2023.

By incorporating these lessons, Graduation and MSD projects can be better adapted to refugee contexts—helping build resilient households that are less likely to fall back into poverty. This work not only enhances food security and economic opportunities but also strengthens social cohesion, as host and refugee communities, including those not directly participating in the project, benefit collectively from new market opportunities.