Challenges for the Millennium Challenge Corp

Lorenzo Piccolo writing in a Devex article provides a short history and an overview to the upcoming opportunities and challenges for the Millennium Challenge Corporation. A few extracts are below. It is a very good summary well-sourced.

Read the full article here. 

The MCC was founded on the premise that policies do matter in development. Since the 1980s, portions of U.S. development assistance have been allocated on the basis of policy performance. President Bush’s initiative broke new ground because all MCC grants, known as compacts, would only be within reach of a select group of poor countries that had taken some command of its own policies that would induce its own development. 

Here’s how the MCC works: to qualify for large, five-year, untied grants for poverty reduction and economic growth, poor countries must perform better than their peers on 17 indicators that measure good governance, economic openness, and social sector investment. 

Once a country qualifies and is selected by the MCC, it must identify its funding priorities and develop a program proposal in consultation with civil society. Before implementation, a compact is signed between the MCC and the recipient country that records mutually agreed objectives and benchmarks. The MCC provides guidance and oversight throughout the process. Since its establishment in 2004, the MCC has signed compacts with 23 countries totaling $8.2 billion, well below President Bush’s $5 billion annual commitment. 

Yet while funding for the MCC has fallen far short of expectations, there is broad agreement in the development community that the agency has nonetheless been a worthwhile experiment and effective aid delivery model. From the Philippines to Lesotho, in what has been called the “MCC effect,” an assortment of countries have enacted meaningful reform in order to join the ranks of compact countries. 

And beyond creating incentives for policies widely believed to support development, the MCC is also producing results on the ground. According to MCC CEO Daniel W. Yohannes, in testimony before Congress, MCC programs have trained over 150,000 farmers and supported construction of more than 890 kilometers of road.

Read the full article here.