The Millennium Challenge Account

The Millennium Challenge Account

An innovative approach to development assistance.

What is it? The Millennium Challenge Account (MCA) is an innovative approach to foreign assistance that delivers substantial new resources to a carefully selected group of poor countries to support development and poverty reduction. The MCA was announced by President Bush in March 2002 and is administered by the Millennium Challenge Corporation (MCC), a government corporation supervised by a Board of Directors composed of Cabinet level officers and representatives of civil society and the private sector.

Why is it important? The MCA offers a new commitment to fighting poverty by partnering with the developing world. If developing countries take the steps forward to educate their people, encourage economic productivity, and fight corruption, then the U.S. will help fund their development priorities. Unlike other forms of U.S. foreign aid, the MCC asks developing countries to prioritize the development sectors and programs the countries would like implement, emphasizing country ownership of the development process. The U.S. has the opportunity to make a real difference in these committed countries-but only if real resources are available.

How does it work?

• Performance-based qualification-The MCC evaluates all eligible countries using a standard set of 17 indicators from independent sources to assess countries' commitment and performance in three categories: ruling justly, establishing economic freedom, and investing in their people. Countries must score better than their peers on at least half of the indicators in each category (better than the "median" score of other countries) and MUST be above the median on the corruption indicator to qualify for a chance to receive funding. Ultimately, the MCC board makes the final decision regarding qualification and may use additional sources of information in their deliberations.

• Country ownership of compact-Once a country qualifies, and is selected by the MCC board, it must prepare a "compact proposal" highlighting the priority areas for funding and the intended outcomes. The MCC acts as an investor, conducting due diligence and evaluating the rate of return on the political, social and economic bottom lines. The country works to implement the compact with guidance from the MCC.

• Results-oriented implementation-Compacts are signed between the MCC and the recipient country usually for five years. Signed compacts lay out clear objectives, benchmarks to measure progress, and a plan for monitoring and evaluating results. Country programs that don't yield results risk being suspended.

• Threshold program - For countries that do not qualify for MCA compact funding, but have demonstrated a strong commitment to improving their performance on the eligibility criteria, the MCC has designed a "threshold" program. The threshold program provides limited assistance to those countries that just miss certain indicators to help them address those specific hurdles to full qualification.

FAST FACTS

• The Millennium Challenge Corporation (MCC) is currently working with 41 countries. Of these, 19 are in sub-Saharan Africa.
• Of the 18 Compacts signed to date with MCC, 10 are with sub-Saharan African countries.
• Compacts with sub-Saharan African countries total $4.5 billion; the majority of all MCC compacts signed to date which total $5.5 billion

Funding for the Millennium Challenge Account:

Compacts include a multi-year plan for achieving development objectives. The MCC authorizing legislation requires that all money for the compact be appropriated before the compact is signed. The costs shown in the chart represent the total cost for the duration of a compact in the year the compact was signed.

Current Millennium Challenge Account Compacts

*Compact or threshold development process suspended due to country actions contrary to the MCC principles

**New disbursements under signed compact suspended due to country actions contrary to MCC principles

***Compact terminated due to country actions contrary to MCC principles

Millennium Challenge Account in Sub-Saharan Africa

Sub-Saharan African Compact Countries:

Madagascar -- $110 million (April, 2005)

Projects: secure formal property rights to land, access credit and protect savings and training in agricultural production, management and marketing techniques (compact terminated).

Cape Verde -- $110 million (July, 2005)

Projects: improve investment climate and reform the financial sector; improve infrastructure to support market access, employment, and social services, and increase agricultural productivity.

Benin -- $307 million (February, 2006)

Projects: improve physical and institutional infrastructure by focusing on access to four critical sectors: land, financial services, justice, and markets.

Ghana $547 million (August, 2006)

Projects: improve agricultural productivity, increase production of high-value commercial and basic food crops, fostering greater private investment in agriculture. Program will also improve the physical and institutional infrastructure in agriculture sector.

Mali -- $461 million (November, 2006)

Projects: irrigation, airport improvement, and industrial park project.

Mozambique -- $507 million (July, 2007)

Projects: improve water and sanitation with over 600 water points in rural provinces; increase transportation access to northern region; provide land tenure services, farmer income support and improved coconut productivity, while encouraging diversification into other cash-crops.

Lesotho -- $363 million (July, 2007)

Projects: improve water supplies; improve health outcomes and productivity by investing in health care infrastructure and human resources and removing barriers to foreign and local private sector investment.

Tanzania -- $698 million (August, 2007)

Projects: increase infrastructure investments in transport, energy and water.

Burkina Faso -- $480 million (June 2008)

Projects: increase investment in land and rural productivity; provide water management and irrigation, technical assistance to farmers, and rural credit; rehabilitate rural and primary roads.

Namibia - $304.5 million (July 2008)

Projects: increase education sector's efficiency and effectiveness; improve tourism management and infrastructure; land tenure and technical assistance to sustainably improve performance of livestock sector.

Sub-Saharan African Threshold Programs:

Burkina Faso, Kenya, Malawi, Rwanda, Saõ Tomé and Principe, Tanzania, Uganda, Zambia

Sub-Saharan African Countries Eligible for Compact or Threshold Program:

Malawi (C), Niger (T), Senegal (C), Zambia (C), Liberia (T)