Overview
What is the MCC Effect?
The MCC Effect is the positive impact that MCC is having on developing countries beyond its direct investments. To date, the most significant impact has been the incentive created for countries to adopt legal, policy, regulatory, and institutional reforms related to the MCC eligibility criteria.
Eligibility for MCC funding can lead to international recognition and increased private sector investment, which has encouraged many countries to implement significant political, social, and economic reforms with tangible results on the ground. In areas as diverse as women’s rights, anti-corruption and governance, and business registration, countries are taking it upon themselves to re-evaluate their laws, policies, regulations, and ways of “doing business.”
MCC’s dramatic effect on data quality and availability is also an important manifestation of the MCC Effect that has strengthened the development community’s ability to “measure for results.” Additionally, the MCC Effect can be seen in the development and implementation of threshold and compact programs.
Participation in these programs has in many cases strengthened country ownership, monitoring and evaluation systems, and donor coordination. Countries are using the experiences gained through MCC programs and applying these lessons to other national programs and processes. In this regard, MCC is helping build the capacity of countries to fight poverty, even outside of its programs.
About the “MCC Effect”
MCC offers readers a first-hand look at primary source material that documents the various impacts of and reactions to the MCC Effect. It is intended as a resource to facilitate additional research, analysis, and debate. We have compiled and organized the evidence around some of the most frequently asked questions about the topic. In almost every case, the public source of the statement, example, or statistic is cited in the appendix. In order to make it easier for reader to locate relevant examples, some information is repeated in certain sections.
As evidence of the MCC Effect continues to emerge, our organization considers it a fundamental part of its commitment to transparency to share this information with stakeholders in the U.S. Congress, the NGO community, other U.S. Government agencies implementing assistance programs and, of course, the U.S. taxpayers who fund MCC’s innovative approach to fighting poverty. This document constitutes only a small portion of some of the evidence that has been collected to date regarding the MCC Effect. We welcome the opportunity to share more information as possible and appropriate, per U.S. Government regulations. Your feedback and questions are welcome at info@mcc.gov.
Have Third-Party Sources Independently Verified the MCC Effect?
The ‘MCC effect’ has been recognized and documented by academics, journalists, NGOs, investors, and donor agencies. MCC has also witnessed this effect first-hand. It has seen countries engage in a policy dialogue with the third-party institutions that provide the MCC eligibility data; set up inter-ministerial committees, presidential commissions, and indicator monitoring units; and develop detailed action plans for reform. In many cases, these efforts have created an incentive for the adoption or accelerated implementation of policies and programs, which have in turn delivered tangible benefits to poor people on the ground.
What are Leaders in the Developing World Saying About the MCC Effect?
MCC’s eligibility criteria have captured the attention of heads of state and ministers in the developing world. Many leaders from developing countries see inclusion in MCC’s threshold program or compact program as a strong signal—to investors and the donor community—that they have put in place a sound policy framework to support economic growth and poverty reduction. Others see the MCC eligibility indicators as a useful guide for shaping policy and resource allocation priorities.
Are There Specific Country Examples of the MCC Effect?
In policy areas as diverse as anti-corruption, women’s rights, and business registration, the MCC eligibility criteria have created a powerful incentive for countries to implement real reforms with tangible results on the ground. These reforms do not appear to be limited to countries that are aspiring to MCA eligibility. Many countries that are already compact-eligible or receiving compact assistance have also enacted important policy changes to remain competitive in future rounds of the eligibility process. Some countries cite their MCA status as a “badge of honor” that sends an important policy signal to the donor community and private investors.
How are the MCC Indicators Being Used By “Champions of Reform” in Developing Countries?
In many countries, the MCC eligibility indicators have bolstered support for “champions of reform” who face strong resistance to change from vested interests. In order to overcome opposition to reform, heads of state, ministers, parliamentarians, and activists increasingly look to the MCC scorecards as a credible source of information on the government’s policy performance from independent, third-party institutions. The prospect of significant MCC funding for economic growth and poverty reduction also increases the political feasibility of reform by enabling these “champions” to build broader coalitions of support.
How are the MCC Scorecards Being Used by Civil Society Groups and Journalists in the Developing World?
MCC’s uniquely transparent and easy-to-read scorecards are published every year for more than one hundred low income and lower middle income countries, and a growing number of journalists, civil society organizations, and citizen activists anxiously await their publication. The MCC scorecards empower a wide range of domestic stakeholders to monitor their government’s performance and advocate for reform.
Is There an MCC Effect on Data Quality and Availablity?
In recent years, important improvements in the quality, coverage, transparency, and “actionability” of the MCC eligibility indicators have occurred. These improvements are partly attributable to MCC’s use of the indicators and increased interest among and scrutiny from candidate countries. This aspect of the MCC Effect has significantly enhanced the development community’s ability to “measure for results.”
Is There an MCC Effect in Compact Development and Implementation?
MCC’s unique approach places a premium on country-led program design and implementation. This ownership is critical for the effectiveness of the MCC program, but the skills and lessons from the compact development and implementation process are also in many cases being applied to other country priorities and processes. In this regard, MCC is having an impact on building the capacity of countries to fight poverty, even outside of its projects. In 2007, MCC hired a polling firm to conduct a blind survey of its country partners, and asked several questions related to country ownership. When country partners in compact implementation were asked if MCC’s approach to country ownership would help them achieve their development goals, a substantial majority (81%) agreed that it would.Can the MCC Effect Be Seen in the Way That Countries are Participating in the Consultative Process?
MCC asks partner governments to undertake a meaningful, public consultative process throughout compact development and implementation. This allows civic, private, and political sector actors to play meaningful roles in setting priorities for the development of the country, and has empowered elected officials to exercise their representative rights and responsibilities. During implementation, civil society representatives participate directly in advisory boards that oversee implementation of the MCC compact.
Is the MCC Effect Having an Impact on the Private Sector in Developing Countries?
MCC has seen a trend of increasing reform among countries that would like to join the MCC “club.” Countries like Guatemala, Albania, Niger, Paraguay, and the Dominican Republic are all implementing reforms that make it easier to start a business and own legal title to property. These reforms draw firms out of the informal economy where they can access credit and grow to their full potential, boost property values and investment, create greater economic opportunities for women, and promote long-term investments in land productivity. In a survey of 60,000 people in more than 50 countries, the World Bank found that men and women believe that the single most effective way to escape poverty is to start a business.
