Overview
Millennium Challenge Account
Background
Bread for the World and many of our partners in the U.S. development community have long advocated for improvements in foreign assistance that will benefit hungry and poor people.
The Millennium Challenge Account (MCA) was created to allocate U.S. assistance to poverty reduction and sustainable economic growth. It is the first significant initiative by any donor government to make available substantially increased assistance to countries based on their performance relative to a transparent set of indicators. MCA policies require, for example, that countries consult with their civil society before projects are formulated. Bread for the World members, through our 2003 Offering of Letters, Rise to the Challenge: End World Hunger, were instrumental in getting the MCA authorizing legislation approved by Congress.
The MCA is administered by the Millennium Challenge Corporation (MCC), a U.S. government corporation. Established in January 2004, the MCC solicits proposals from developing countries that meet specific criteria in the areas of good governance, controlling corruption and investing in people.
Achievements So Far
As of spring 2007, the MCC had signed five-year compacts with 11 countries. These compacts total nearly $3 billion, and when fully implemented, they will affect the lives of more than 22 million people now living in poverty.
Approximately $300 million has been provided to another 13 countries through the MCA Threshold Program, which helps countries that come close to meeting MCA selection criteria to improve in their areas of weakness.
The stringent eligibility requirements for MCA compacts have stimulated policy reforms in still other countries, particularly in fighting corruption, improving government transparency and promoting women's rights. This is referred to as the "MCA effect."
Examples:
- MCA Compact: In Madagascar, almost 2,000 local farmers and enterprises have received technical assistance from six new agricultural business centers. Another 225 farmers have been helped to qualify for microfinance credit. Since the first MCC-funded "guichet foncier" (local land office) was officially inaugurated on May 20, 2006, 353 land certificates have been issued, 30 percent of them to women. Holding a land certificate allows farmers to obtain credit to expanding or improve their operations. Technical assistance in production and marketing then enables farmers to identify and respond to market opportunities.
- MCA Compact: In Georgia, work has begun on rehabilitating municipal water supplies in two cities, serving a total of 230,000 residents.
- "MCA Effect": In order to improve its eligibility for the MCA, El Salvador made reforms which reduced the number of days needed to start a business from 115 to 26. As a result, new business registrations jumped by 500 percent.
- "MCA Effect": Improvements in gender equality were required as a condition of MCA compact development for Lesotho. Recently, Lesotho's parliament granted married women the legal rights of adults.
The MCC has improved the development expertise of its staff, hiring accomplished and experienced staff at every level of the organization. As a result, eligible countries are getting significantly better guidance in preparing compact proposals and compacts are being finalized more quickly.
Chief Executive Officer Ambassador John Danilovich made a statement on April 4, 2007 on current and future directions of the MCC.
Bread for the World and other nonprofit advocacy groups have spurred improvements in the operation and outlook of the MCA.
- When the MCA was first authorized, Bread for the World supported the establishment of the MCA threshold program in order to broaden the number of countries with access to MCA resources and help those close to qualification to meet their remaining criteria.
- The advocacy community also supported coordination between the MCA and traditional U.S. development programs. For example, we helped ensure that the administrator of USAID has a permanent, equal seat on the MCC board of directors.
- At the urging of Bread for the World and our coalition partners in InterAction's MCA Working Group, the MCC has added environmental and gender concerns to the list of MCA selection criteria. There are three new indicators – natural resource management, land tenure, and the primary school completion rate of girls. In January 2007, the MCC launched a new gender policy designed to ensure that women are included in every step of the MCA process.
- One of the greatest achievements of advocacy work has been the increasing level of transparency of the MCC. All agreements, reports to Congress, and reports on countries' performance on selection indicators are posted to the MCC Web site at www.mcc.gov. After each board meeting, the MCC holds general outreach meetings where staff members are available to answer questions. The minutes of board meetings are also published. The MCC has consistently consulted with various nonprofit coalitions for guidance and input on planned decisions and draft policies -- a level of transparency unparalleled among government agencies.
The MCC's performance has also been evaluated by the Congressional Research Service. The most recent report is available for download 
from their website .
What Lies Ahead
The MCA/MCC is now facing its first real challenge in Congress. Since the MCA was authorized in 2002, Congress has funded the program, although the requests have consistently been significantly lower than the $5 billion in annual funding that the president had initially pledged would begin in 2006.
The MCA provides full funding for compacts, all of which are multi-year, upon signature of the agreement. Thus, recipient countries are guaranteed that the funds will be available; MCC programs do not face the constraints imposed on other development initiatives by the annual appropriations process. However, two years of flat funding has meant that there are now more countries eligible for compacts than resources available -- especially if the compacts are to be on the transformative scale originally envisaged.
For FY2008, the administration has requested $3 billion in MCC funding. Securing at least this amount is vital for the MCA to keep pace with current and increasing demand. If a country's likelihood of actually receiving a compact for which it has qualified comes into question, the MCA is likely to lose its incentive effect as well as some long-sought-after policy reforms in applicant countries.
But with the change in control of Congress and the extremely tight budget situation, the MCA/MCC is vulnerable on both political and budgetary grounds. The latest Center for Global Development assessment – Will the Millennium Challenge Account Be Caught in the Crosshairs? – was published March 30, 2007.
As part of our ongoing advocacy for “more and better” poverty-focused development assistance, Bread for the World urges Congress to support, at a minimum, the administration’s $3 billion MCC request for FY2008.
