millennium challenge corporation

Millennium Challenge Corporation

Reducing Poverty Through Growth


Millennium Challenge CorporationReducing Poverty Through Growth

Fulfillment of Monterrey commitment to “provide greater resources to countries taking greater responsibility for their own development.”

Established in law January 2004.

Mandate is Poverty Reduction Through Economic Growth


Based on Key Lessons of Based on Key Lessons of AidAid

POLICIES MATTERPOLICIES MATTER

“We want to make decisions ourselves. It is our country, and we have to take on leadership and responsibilities. If you take a look at the last two issues, our vision and country ownership, you will realize why the MCA is so important for us. Here we have a new approach which helps us to implement our vision. We have opportunities to design and implement our own programs.”--Marc Ravalomanana, The President of Madagascar School of Advanced International Studies, Johns Hopkins University, April 19, 2005

COUNTRY OWNERSHIP CRITICALCOUNTRY OWNERSHIP CRITICAL

RESULTS, NOT INPUTS COUNTRESULTS, NOT INPUTS COUNT


Policies MatterPolicies Matter

Good policies encourage inflows of private Good policies encourage inflows of private capital and increased trade, the real capital and increased trade, the real engines of growth.engines of growth.

Country eligibility based on sixteen Country eligibility based on sixteen independent indicators in three different independent indicators in three different criteriacriteria

Countries are measured against other Countries are measured against other countries of similar income levelcountries of similar income level Ruling JustlyRuling Justly

Investing in PeopleInvesting in People Encouraging Economic FreedomEncouraging Economic Freedom

Policies Matter

Africa

Benin Mali

Burkina Faso Morocco

Cape Verde Mozambique

Gambia Namibia

Ghana Senegal

Lesotho Tanzania

Madagascar

Latin AmericaEurasia

Bolivia Armenia

El Salvador East Timor

Honduras Georgia

Nicaragua Mongolia

Sri Lanka

Vanuatu


23 Countries Selected by MCC Board in Fiscal Years 2004 - 2006

Burkina Faso’s Threshold Program: Increasing Girls’ Primary School Completion

Through the construction of new schools in provinces that lack sufficient schools, more girls will be able to attend primary school in Burkina Faso. Their Threshold program with MCC aims to enroll 1,650 new female students within the first year.


Policies MatterPolicies Matter

Threshold ProgramThreshold Program reinforces this objective reinforces this objective Threshold CountriesThreshold Countries

• Close on the indicatorsClose on the indicators• Demonstrated commitment to reformDemonstrated commitment to reform

May propose funding to specifically improve on MCC indicatorsMay propose funding to specifically improve on MCC indicators

MCC eligibility intended as an incentive to improve policiesMCC eligibility intended as an incentive to improve policies

Threshold Countries*Threshold Countries*Africa

Kenya

Malawi

Sấo Tomé and Principe

Uganda

Zambia

Latin America

Guyana

Paraguay

Eurasia

Albania

Indonesia

Kyrgyz Republic

Jordan

Moldova

Philippines

Ukraine

Yemen**


* Burkina Faso, Tanzania, East Timor moved from Threshold Program to Eligible in FY2006

** Yemen was suspended from the Threshold Program in FY2006

Country Ownership CriticalCountry Ownership Critical Eligible countries submit proposal for MCC Eligible countries submit proposal for MCC

funding, after consulting with civil society funding, after consulting with civil society and private sector. and private sector.

MCC assesses proposals based on: MCC assesses proposals based on: • The contribution to poverty reduction and The contribution to poverty reduction and

growth growth • The quality of the consultative process The quality of the consultative process

and breadth of supportand breadth of support• The ability to measure resultsThe ability to measure results


Results BasedResults Based Specific objectives and measures of Specific objectives and measures of

success are agreed on from the beginningsuccess are agreed on from the beginning

A monitoring and evaluation plan is an integral A monitoring and evaluation plan is an integral part of each Compactpart of each Compact

Continued funding is contingent on Continued funding is contingent on continued performance on the indicators continued performance on the indicators and meeting agreed benchmarks for and meeting agreed benchmarks for program implementationprogram implementation


Example: The Madagascar Compact

Signed April 18, 2005

$110 Million over 4 $110 Million over 4 YearsYears

Goal – Goal – Increase Increase investment in rural investment in rural MadagascarMadagascar

Three Integrated Three Integrated ProjectsProjects

1)1) Land TenureLand Tenure2)2) Financial SectorFinancial Sector3)3) Agricultural Business Agricultural Business

InvestmentInvestment


Land Tenure Project

Financial Sector Project

Agricultural BusinessInvestment Project

ProgramAdministration

Monitoring andEvaluation

Fiscal and ProcurementManagement and Audits

Objectives and Indicators for the Objectives and Indicators for the Madagascar ProgramMadagascar Program

ObjectivesObjectives IndicatorsIndicators

Compact Compact Poverty reduction and Poverty reduction and economic growth in economic growth in targeted rural targeted rural Investment ZonesInvestment Zones

Household income in Household income in targeted Zonestargeted Zones

Land productivity in Land productivity in targeted Zonestargeted Zones

ProgramProgram Increase investment in Increase investment in targeted Zonestargeted Zones

Total amount invested Total amount invested by farms and by farms and businesses in targeted businesses in targeted ZonesZones


Objectives and Indicators for the Madagascar Objectives and Indicators for the Madagascar ProgramProgram


Land Land Tenure Tenure ProjectProject

Improved land Improved land tenure and land tenure and land securitysecurity

Percentage of Percentage of targeted targeted hectares with a hectares with a land title or land title or certificate certificate

Key Key benchmarksbenchmarks

• Submission, passage, and Submission, passage, and implementation of new land lawimplementation of new land law• Percentage of land documents Percentage of land documents restored and/or digitizedrestored and/or digitized• Percent of targeted land that is Percent of targeted land that is demarcated and ready for demarcated and ready for registrationregistration• Average time and cost required Average time and cost required to carry out property transactionsto carry out property transactions


Madagascar's central land titling office which stores entirely paper-based titles.


Finance Finance ProjectProject

Increased competition in the Increased competition in the financial sectorfinancial sector

Number and value of new Number and value of new loans and bank accountsloans and bank accounts

KeyKeybenchmarksbenchmarks

• Submission, passage, and implementation of new lawsSubmission, passage, and implementation of new laws• Number of holders of new treasury billsNumber of holders of new treasury bills• Volume of treasury bill holdsVolume of treasury bill holds• Number of treasury bills held outside of AntananarivoNumber of treasury bills held outside of Antananarivo• Check clearing delayCheck clearing delay• Volume of funds in the payment systemVolume of funds in the payment system• Volume of microfinance institution (MFI) lending in the Volume of microfinance institution (MFI) lending in the

targeted zonestargeted zones• MFI portfolio-at-risk delinquency rateMFI portfolio-at-risk delinquency rate• Reporting of credit and payment information to central Reporting of credit and payment information to central

databasedatabase





Agriculture Agriculture Business Business Investment Investment ProjectProject

Improve Improve production production technology and technology and market capacity market capacity in the targeted in the targeted ZonesZones

Number of Number of farmers and farmers and firms that adopt firms that adopt new technologies new technologies or engage in or engage in higher value higher value productionproduction

Key Key benchmarksbenchmarks

• Zones identifiedZones identified• Number of farmers and firms Number of farmers and firms employing technical assistanceemploying technical assistance• Number of farmers and firms Number of farmers and firms receiving or soliciting information receiving or soliciting information on business opportunities identifiedon business opportunities identified


A family selling produce and grains outside of their home in Mahitsy, Madagascar.

What Have Countries Asked What Have Countries Asked For?For?

Every proposal uniqueEvery proposal unique

No predetermined allocationNo predetermined allocation

Rural development, land titling, Rural development, land titling, infrastructure (roads, ports, airports), infrastructure (roads, ports, airports), improving business environmentimproving business environment

Water and sanitation, but few proposals in Water and sanitation, but few proposals in health and education so farhealth and education so far

Contributing to Aid for Contributing to Aid for TradeTrade

First five Compacts include $640 million in First five Compacts include $640 million in trade related activities (including roads, ports, trade related activities (including roads, ports, and agricultural goods for export markets).and agricultural goods for export markets).

Next three Compacts likely to be signed Next three Compacts likely to be signed include at least $300 million more in such include at least $300 million more in such activities.activities.

Nearly 63% of financing under these eight Nearly 63% of financing under these eight Compacts is aid for trade.Compacts is aid for trade.


ImplementationImplementation The Compact defines responsibilities. The The Compact defines responsibilities. The

country is responsible for implementation. country is responsible for implementation.

Each Compact will also define the Each Compact will also define the governance and accountability structure, governance and accountability structure, which will cover processes and entities which will cover processes and entities responsible for managing MCC funds, responsible for managing MCC funds, guidelines governing procurement and guidelines governing procurement and entities responsible for administering entities responsible for administering procurements.procurements.

MCC may have one or two representatives in MCC may have one or two representatives in an MCA country an MCA country


Principles of Fiscal Principles of Fiscal AccountabilityAccountability

Every country is unique, no single solutionEvery country is unique, no single solution

Find a solution that best serves Compact objectivesFind a solution that best serves Compact objectives

Build upon existing mechanisms when possibleBuild upon existing mechanisms when possible

Leave capacity in place wherever possibleLeave capacity in place wherever possible

Solution must have maximum transparency, Solution must have maximum transparency, integrity, and accountabilityintegrity, and accountability


MILLENNIUM CHALLENGE CORPORATION

MCC REP

FISCAL AGENTFINANC MGMT

(Finance Ministry)(Donor)

(Accounting Firm)

FISCAL AGENTPROCUREMENT

(Finance Ministry)(Donor)

(Accounting Firm)(1 or more Project Mgr)

BANK ACCOUNT

(Central Bank)(Commercial

Bank)

VENDOR VENDOR VENDOR VENDOR

GOVERNMENT

• Creates, if necessary, and assigns

responsibilities

• Allocate budgets• Approve re-disbursements

• Provide accounting records

• Approve certain contract actions

• Exercises MCC rights

under Compact

• Submit disbursement requests• Provide budget• Provide financial and M&E reports

• Signatories to Compact

MCC Disbursement $$

Re-disbursement $$

• Instruct to issue

payment

• Document obligations• Initiate re-disbursements• Initiate procurement

Audit

FISCAL ACCOUNTABILITY ELEMENTS

PROJECT MANAGER 1

(Govt Ministry)(Donor PIU)(Private Co.)

(NGO)

PROJECT MANAGER 2

(Govt Ministry)(Donor PIU)(Private Co.)

(NGO)

ACCOUNTABLE ENTITY

(Governing Council)(MCC Committee)

(PM Office)

• Administer/certify procurement process

Illustrative Models

Government Non-Government

Accountable Entity– Prime Minister or Cabinet MCC Steering Committee

Fiscal Agent-- Ministry of Finance Accounting Firm

Procurement Agent- Ministry of Finance Private implementer

Bank Account-- Central Bank Commercial Bank

Project Managers-- Line Ministries NGOs


Common ElementsCommon Elements

Financial and procurement information Financial and procurement information available publicly through a local MCA available publicly through a local MCA Website and advertised in UN Business Website and advertised in UN Business DevelopmentDevelopment

Money will be disbursed in tranchesMoney will be disbursed in tranches

All MCC programs will be subject to All MCC programs will be subject to external auditexternal audit

Role of the MCC Inspector GeneralRole of the MCC Inspector General



Compact Development Process

Where is the MCC Today?Where is the MCC Today?

Five Compacts signed – Cape Verde, Georgia, Five Compacts signed – Cape Verde, Georgia, Honduras, Madagascar, Nicaragua; nearly $1 Honduras, Madagascar, Nicaragua; nearly $1 billion committed.billion committed.

Robust pipeline – Armenia, Benin, Vanuatu.Robust pipeline – Armenia, Benin, Vanuatu.

Threshold agreements with Burkina Faso and Threshold agreements with Burkina Faso and Malawi .Malawi .

Congress has appropriated $4.27 billion to date.Congress has appropriated $4.27 billion to date.


millennium challenge corporation

Documents

poverty reduction

mcc funding

mcc indicators mcc eligibility

mcc board

growth23 countries

policiesthreshold countries

country eligibility

real engines of growth