MCC actively engages with the private sector throughout the development and implementation of its threshold programs and compacts to spur economic growth in partner countries. By holding its partner countries accountable to high standards of good governance and by capitalizing on private investment and expertise, MCC is delivering development results and creating new opportunities for U.S. firms in frontier markets.
Driving Reforms
MCC’s strict standards for countries to receive aid have created an incentive for countries to make reforms before MCC expends even a dollar of assistance, a phenomenon called the “MCC Effect.” A country understands that becoming eligible for an MCC compact means more than just grant funding—it is a signal to the world that the country is on a positive track. It also inspires a sense of pride, sending a message that the United States believes it has the political, social, and economic potential for long-term progress. MCC’s selection criteria encourage countries to reform policies, strengthen institutions, and improve data quality in order to boost their performance in the areas of economic freedom, ruling justly, and investing in their people, as measured by the MCC scorecard.MCC programs seek to address barriers to growth and sustain significantly increased levels of income for beneficiaries long after compact programs end. To achieve this goal, a compact is implemented in tandem with a broader development strategy. During the compact development process, MCC and the partner country examine conditions surrounding the proposed compact and develop a plan for policy reform that will maximize the compact’s impact and sustainability. The partner government must succeed in making crucial policy changes before MCC releases funding and continue with others to improve the operating and policy environment during implementation. These policy reforms ultimately support the conditions necessary for continued growth and investments.
Creating New Opportunities for Economic Growth
Women’s Economic Empowerment
Strengthening economic opportunities for women is fundamental to MCC’s mission to reduce poverty through economic growth. As part of its data-driven model, MCC consistently works with partner countries to unlock the economic potential of women and overcome financial, legal, and cultural barriers that prevent women from fully engaging in their countries’ economies.Since its inception, MCC has mandated the integration of gender into its country programs. Gender analysis and a rigorous evidence base inform all aspects of MCC’s work, from selecting country partners to identifying gender-responsive economic growth constraints to supporting partner governments to enact legal and policy changes to create an enabling environment for women. MCC’s country scorecard, which MCC’s Board uses to determine eligibility for funding, includes an indicator for gender in the economy. The indicator criteria signal to countries that the laws that prevent women from equally engaging in the economy matter and will influence eligibility for MCC funding. In addition, each MCC compact and threshold program requires a Social and Gender Integration Plan, which provides a comprehensive roadmap for social inclusion and gender integration throughout program implementation. MCC supports activities to expand income-generating activities and employment opportunities for women, to increase women’s access to land, education, and skills development, and to enable women-owned businesses to take advantage of new market opportunities. Through its compact and threshold programs, which include significant assistance for policy and institutional reform as well as infrastructure, MCC boosts the U.S. Government’s ability to change the landscape of women’s economic empowerment around the world.
MCC committed to further incorporating women’s economic empowerment into its program design by adopting a new institutional investment criterion for this critical element—a first for the agency. MCC’s work reinforces the U.S. Government’s work to support women’s workforce training and skills development, entrepreneurship and access to capital, and overall enabling environment of laws, regulations, and policies that impact women’s participation in the economy. MCC supports this ambitious integrated approach to align the experience, commitment, and expertise of the U.S. Government’s international development agencies to advance women’s economic progress around the world.
Prosper Africa
Prosper Africa is a U.S. Government initiative that unlocks opportunities to do business in Africa—benefiting companies, investors, and workers in Africa and the United States. Prosper Africa brings together the resources of more than 15 U.S. Government agencies to connect U.S. and African businesses with new buyers, suppliers, and investment opportunities, making it easier for companies to access U.S. Government trade and investment support services.Catalyzing private investment for development has been fundamental to MCC’s work since its founding, and MCC’s support of economic growth in Africa delivers mutual benefits to the United States and our partners on the continent. Each U.S. Government agency provides a unique contribution to Prosper Africa, and MCC’s compacts are effective in promoting long-term growth through infrastructure investments and a focus on improving the business climate.
Blended Finance
MCC has practiced blended finance since its founding. Whether leveraging public-private partnerships in projects like the Benin Port and the Jordan wastewater treatment facility; designing and managing leverage grant facilities to bring additional private sector funding to programs, such as in the Green Prosperity Project in Indonesia; or catalyzing private sector investment around our programs, such as in Ghana, Malawi, and El Salvador, leveraging private sector investment to further MCC’s mission has been at the heart of what MCC does.Private sector investment is essential for sustainable poverty-reducing economic growth. The United Nations estimates that the annual financing gap to achieve the Sustainable Development Goals by 2030 currently sits at $2.5 trillion. While Official Development Assistance continues to play a key role, closing this gap will require development agencies to help unlock and direct finance from other sources.
Recognizing shifts in the global development landscape and the opportunity to scale up impact, in 2020 MCC expanded and deepened blended finance capacity, portfolio, and leverage through new strategies and better tools, including:
Development of a new institutional investment criterion: To better support the integration of blended finance tools in MCC’s grant programs, the agency recently adopted a new institutional investment criterion to encourage MCC’s country teams to identify, evaluate, and pursue opportunities for blended finance at the earliest stages of the compact development process. The addition of this criterion ensures that country teams consider opportunities for blended finance at all stages of compact development.
Innovation Technology Program: MCC has furthered collaborations with the U.S. Small Business Administration (SBA) to offer future compact and threshold programs the opportunity to bring proven U.S. technologies to MCC partner countries through a newly established Innovation and Technology Program (ITP). Through the ITP, MCC is working with SBA and other U.S. federal agencies participating in the Small Business Innovation Research (SBIR)/Small Business Technology Transfer (STTR) programs to identify, pilot, and scale innovative technologies to address country-specific needs in MCC compacts.
Millennium Impact for Infrastructure Accelerator: In fiscal year 2020, MCC initiated a collaboration with Africa50 to create the Millennium Impact for Infrastructure Accelerator (MIIA), with the goal of attracting impact capital by developing bankable infrastructure deals with measurable social and economic impacts. MIIA seeks to mobilize much-needed private capital to the most impactful infrastructure projects in the power, water, sanitation, health, education, and transport sectors. MIIA aims to attract impact capital by supporting project preparation and innovative financing structures for bankable infrastructure projects and linking impact investors to bankable deals that meet their impact criteria.
Collaboration with the U.S. International Development Finance Corporation: MCC and the U.S. International Development Finance Corporation (DFC) have been working to increase interagency coordination in U.S. foreign development as commissioned by the Better Utilization of Investments Leading to Development (BUILD) Act of 2018. As part of this effort, MCC and DFC have explored opportunities to more systematically incorporate opportunities for collaboration into MCC’s programs from the early stages of the development process and through new blended finance tools. MCC and DFC have developed a new blended finance mechanism, the American Catalyst Facility for Development (ACFD). The ACFD aims to leverage the strengths of both agencies and to enable coordinated catalytic investments in MCC’s portfolio by providing strategic grants aimed at crowding-in the private sector and maximizing the overall impact of U.S. Government development efforts.
Legislation to Address COVID-19 Impacts
MCC’s programs experienced significant delays due to COVID-19. These delays have been particularly acute in Ghana, Benin, Morocco, Niger, and Cote d’Ivoire, which have compacts in implementation in 2020 and are subject to MCC’s five-year statutory time limit for assistance.MCC worked closely with Congress, with support from the White House, OMB, and interagency partners, for legislative authorization to extend for up to one-year compacts in implementation that the pandemic affected. This request does not require new compact assistance funding or resources. The extension would increase MCC’s time limit for compacts in effect as of January 29, 2020, to ensure the sustainability of U.S. investments abroad and to maximize the impact of U.S. taxpayer dollars through the agency’s programs in key partner countries.
MCC will continue to advocate for its passage in Fiscal Year 2021.