Overview

The rationale for MCC investments in agriculture rests on the multifaceted role that the sector plays in the economy of countries that have entered into Millennium Challenge Compacts.  Namely, agriculture can be a source of growth for the national economy, a provider of investment opportunities for the private sector, and a prime driver of agriculture-related industries and the rural non-farm economy.

On the household level, agriculture is a source of livelihoods for an estimated 86% of rural people throughout the world.  Of the developing world’s 5.6 billion people, 3 billion live in rural areas, nearly half of humanity.  In MCC’s Compact countries to date, some 61% of the population—over 120 million people—live in rural areas.  For MCC Compact countries for which data are available, agriculture generates on average 21% of gross domestic product (GDP), employs 59% percent of the labor force, and accounts for 38% of total merchandise exports.  Beyond the agricultural sector itself, the industries and services linked to agriculture in value chains account for a significant percentage of GDP even in increasingly urbanized countries.

Agricultural programs funded by MCC are generally designed to contribute to poverty reduction and economic growth by making agriculture more competitive, productive and profitable, leading to higher sales, additional employment opportunities, and improved farm household livelihoods.  These programs emphasize different paths of intervention, but often include training and extension to farmers and/or agribusinesses, increased access to inputs, such as improved seeds, fertilizers, or veterinary services, and support to farmers’ associations as a vehicle for greater market participation.  Some programs focus on traditional crops and livestock, while others seek to offer incentives to switch to alternative, higher value production. 

One important challenge for these programs is to create sufficient incentives, not only to improve the welfare of beneficiary farm households, but also to trigger sustainable growth.  In countries where MCC intervenes, agricultural sectors are typically characterized by a large number of relatively inefficient small producers of similar crops or livestock and with limited market power.  Farmers in poor countries also have limited access to capital and often have large discount rates against future benefits in part because household production and consumption are closely tied.  Because of the multifaceted aspects of the agricultural sector in these countries, MCC programs often combine interventions in agriculture with substantial investments in infrastructure, financial sector and small business development or land tenure reforms.  The impacts of these programs on household income are measured taking into account the combined effects of these interventions.

Given the importance of agriculture programs in many development institutions, rigorous evaluations of their effectiveness should also play an important role.  The key questions for MCC have centered around understanding farmer adoption of more profitable agricultural practices, and the ways in which the impact of such interventions is contingent on related investments, such as in financial services, organizational development, and infrastructure.

Data from WDI 2006, or most recently available year, as of July 2008 and based on 18 Compact countries.

Logic Model

MCC Impact Evaluations in Progress

Sort the table by clicking on the column headers. Arrows indicate ascending and descending order.

Country	Project/Activity	Focus of Evaluation	Methodology
Armenia	Water-to-Market Activity	What is the impact of on-farm water management training on farming practices, agricultural productivity, and the income of rural farming households?	Randomized control trial
Georgia	Agribusiness Development Activity (ADA)	How does the provision of ADA grants to farmers and farm-related businesses impact household income, poverty levels, and job creation?	Randomized control trial
Ghana	Development of Agricultural Productivity and Value-Added Project	Does the Farmer-Based Organization (FBO) training program encourage farmers to adopt new technologies or techniques? What is the magnitude of spillover from MiDA-trained farmers on other farmers nearby and on those in the MiDA-trained farmers’ social networks? Does the FBO training program cause farmers to get higher yields and sales?	Randomized control trial
Honduras	Rural Development Project	What is the impact of increased productivity and business skills on incomes?	Randomized control trial