MCC actively engages with the private sector throughout the development and implementation of its threshold and compact programs 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 even a dollar of MCC assistance is expended, 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 sends a message that the United States believes it has the political, social and economic potential for long-term progress. MCC’s eligibility criteria incentivize countries to reform policies, strengthen institutions and improve data quality 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 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 program and develop a plan for policy reform that will maximize the compact’s impact and sustainability. The partner government must make crucial policy changes before funding is released and must continue 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
Climate
MCC recognizes that climate change, poverty and economic growth are inextricably linked, and that climate change poses the greatest risk to developing countries, whose people, economies, and institutions are less able to adapt to its consequences. Climate-resilient and otherwise sustainable investments have been a core MCC competency for years. MCC is working with partner countries to develop innovative climate-resilient solutions to combat poverty and help build climate-resilient economies that promote sustainable and inclusive growth, enhance resilience to future crises, reduce greenhouse gas (GHG) emissions, and adapt to new climate realities.
With more than $5 billion in total anticipated, country-led investments between 2021–2025, MCC is well positioned to make a significant impact in advancing sustainable, inclusive climate-resilient economic growth in partner countries around the world. In FY 2023, MCC made significant progress advancing all six of the stated objectives in MCC’s Climate Strategy launched in 2021. Specifically, the agency did the following:
- Strengthened integration of climate considerations in analytical tools. In FY 2023, MCC integrated climate and natural capital considerations into the analysis of constraints on economic growth for programs under development in Togo, The Gambia, and Mauritania. In FY 2023, MCC also made progress in developing its GHG accounting system, which will allow the agency to track GHG emissions associated with our international programs.
Integrated climate and related environmental considerations into all stages of program development and implementation. In FY 2023, MCC signed over $1.7 billion in country-led investments, all of which include climate considerations.
- Supported policy and institutional reforms in adaptation to strengthen the resilience of MCC investments. MCC continues to make progress integrating climate into policy and institutional reforms in our programming. MCC’s $649 million Indonesia Infrastructure and Finance Compact dedicated $11 million to strengthening preparedness for low-carbon and climate-resilient development through a program targeting decision-makers in five provinces. The Sierra Leone Energy Compact currently under development includes sector reforms to strengthen the institutional capacity to identify and manage climate risks. Through these interventions MCC continues to be a key partner and reliable donor for our country partners to meet their Nationally Determined Contributions and climate ambitions.
- Leveraged blended finance to catalyze private capital for climate activities. MCC continues to explore opportunities to use blended finance in support of climate goals and to make progress on Climate Finance +. MCC and USAID launched Climate Finance + at COP27 as a collaborative government approach to strategically use public finance to unlock billions in private investments for green and climate-friendly infrastructure. For example, in FY 2023, MCC compact funding provided a $10 million grant to increase capital reserves for Morocco’s sole public guarantor of private investments, allowing them to provide up to $100 million in guarantees to catalyze up to $200 million in climate-related investments in industrial zones.
Continued to expand and deepen partnerships to further climate objectives. In FY 2023, MCC continued to strengthen its partnerships to better inform its work and develop country programs. In December 2022, in partnership with the University of Massachusetts, MCC developed guidance aimed at helping MCC assess and enhance the robustness of projects in the face of climate change, both in terms of project design metrics and in anticipated economic impacts measured through cost-benefit analysis. MCC also launched a new partnership with the MIT Joint Program on the Science and Policy of Global Change in February 2023.
- Integrated climate considerations into MCC’s facilities management and internal operations. MCC is currently assessing and reviewing lease alternatives for MCC’s D.C.-based office. In FY 2023, MCC established an internal information hub on climate impacts of travel that provides staff with tools and resources to raise awareness, assess GHG emissions, and inform individuals on ways to reduce the climate impacts associated with their official travel.
To learn more about MCC’s role in climate-smart development, visit https://www.mcc.gov/about/priority/climate.
Inclusion and Gender
In FY 2023, MCC continued to uphold and reaffirm its CLEAR values (Collaboration, Learning, Excellence, Accountability and Respect) to foster an inclusive culture that supports staff, teams, departments, and cross-departmental and agency-wide engagement, as well as continuing to take action to advance racial and gender equity.
MCC adopted an Inclusion and Gender Strategy in late 2022. MCC’s Inclusion and Gender Strategy aims to significantly deepen its commitment to inclusion and gender equity and equality, thereby routinely and systematically increasing the ability of poor people, women and other marginalized groups to access, participate in or derive benefits from its investments. In 2023, MCC worked on operationalizing aspects of the strategy’s five key objectives and implemented the strategy across multiple fronts. When assessing the binding constraints on a country’s economic growth, the analysis now identifies structurally excluded groups and the likelihood that alleviation of specific constraints on economic growth will positively impact those populations.
In addition, consistent with E.O. 14035 requirements for advancing DEIA in the federal workforce, MCC has been taking actions to further elevate DEIA within the agency. In May 2022, MCC publicly released its DEIA Strategic Plan. The plan outlines an integrated approach to advancing DEIA by embedding it into the agency’s mission, human capital strategy, corporate goals, and workstreams. To implement this plan, MCC’s corporate and department goals include efforts to mitigate biases and reduce barriers to DEIA. One example includes the agency’s focus to expand MCC’s recruiting outreach to diverse professional networks via the MCC Roadshow program, HR recruitment and career fairs, and leveraging various federal government sponsored fellowship programs. Moving forward, MCC will focus on institutionalizing DEIA strategy by embedding goals and activities into operations such as bias mitigation strategies and by deploying best practices for effective recruitment and retention.
Blended Finance
MCC has sought to catalyze private sector investment in and around our programs since our founding in 2004. Within the U.S. Government development toolkit, MCC is well positioned to catalyze private investment through the strategic use of public funds to mobilize private resources in ways that support sustainable, long-term economic development in partner countries. MCC engages in blended finance in three keys ways: as a catalyst, builder, and dealmaker. As a catalyst, MCC works hand-in-hand with country partners on targeted policy and institutional reforms necessary to create an enabling environment for private sector investment. MCC provides strategic, financial and technical advisory support to create pipelines of investable opportunities in MCC’s partner countries. As a builder, MCC works with partner countries to strategically invest in public infrastructure that promotes economic development and supports private-sector investment. As a dealmaker, MCC provides strategic grants to crowd-in commercial finance, offers pathways to scale and capital to create markets for innovations and proven business models, and brings transactions and financially viable PPP projects to market that meet international standards. Throughout all MCC’s work in blended finance, MCC seeks to target its resources where commercial financing is not available for deployment toward achieving development outcomes that address constraints on economic growth.
In FY 2023, MCC expanded and deepened its blended finance capacity, portfolio and leverage by continuing to operationalize the ACFD. ACFD creates a formal platform to optimize and organize MCC-DFC collaboration and to leverage the strengths of both agencies to catalyze and enable DFC investments. Funds have been included in the compacts for Malawi, Lesotho, and Kosovo to facilitate the use of the ACFD mechanism. MCC and DFC continue to explore the applicability of ACFD in other MCC country programs currently in development such as Sierra Leone, Belize, and Zambia. As MCC and DFC gain experience in the initial countries, the agencies will assess the results and continue to refine the approach and mechanisms to maximize the impact of the ACFD as new partner countries are added to MCC’s portfolio.
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. In FY 2023, MCC in collaboration with USAID under Prosper Africa established a green guarantee in Morocco to provide businesses in industrial zones better access to finance for investments that reduce their environmental impact. The compact’s $10 million grant increased capital reserves for Morocco’s public guarantor of private investments, Tamwilcom, allowing them to provide up to $100 million in guarantees that would catalyze up to $200 million in climate-related investments in industrial zones. Prosper Africa played a key role in mobilizing resources through USAID to conduct critical due diligence related to this transaction.
Digital Transformation—MCC’s Digital Collaboratives for Local Impact
MCC’s Digital Collaboratives for Local Impact (DCLI) builds MCC’s digital expertise and supports more-inclusive, future-ready growth. DCLI works across departments, divisions and practices to surface digitalization opportunities in MCC investments, contribute to transforming the digital space by making it work for the underserved, and promote development through data use, digital innovation and civic technology.
The value of MCC’s digital portfolio is growing as digitalization becomes increasingly integral to development objectives and important to the economies of partner countries. In FY 2023, DCLI advanced MCC’s contributions to digitalization and to the Biden-Harris Administration’s Digital Transformation with Africa initiative, through the following investments:
- More than 3,500 women-owned small and medium enterprises (W-SMEs) benefited from a $5.3 million program, funded through a partnership between USAID, Microsoft and the Government of Côte d’Ivoire, to empower existing and new W-SMEs with the data and digital literacy and skills they need to grow their businesses.
- The U.S. African Development Foundation established a dedicated fund to help graduates of the Digifemmes program further refine their products, expand their markets and grow their businesses through digital tools and innovations.
- DCLI procured resources needed to implement the $22.5 million digital health component of the Lesotho Health Systems Strengthening Project of the $300 million Lesotho Compact signed in May 2022.
- DCLI assessed the digital and innovation environments in Togo, Mauritania and The Gambia.
- DCLI contributed to the development of the Togo Compact, including potential investments in broadband connectivity, digital payments, and digital skills and innovation.
An essential part of DCLI’s work is outreach. In FY 2023, MCC’s DCLI and Office of Strategic Partnerships teams continued to meet with a broad array of private sector companies, foundations and funding organizations involved in digital connectivity, digital public infrastructure, and digital skills and innovation to extend the agency’s reach and knowledge.