Dynamics: power to the people

Reducing poverty: the millennium’s challenge

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We speak to senior representatives of a US development agency, the Millennium Challenge Corporation (MCC), about its efforts to work with private sector partners to reduce global poverty.

“Bringing in private investors is part of MCC’s DNA.” - Carl Sangree, Millennium Challenge Corporation

Created in 2004, the MCC partners with some of the world’s poorest countries, but only those committed to good governance, economic freedom and investments in their citizens.

By providing large-scale grants to fund country-led solutions for reducing poverty, it aims to:

  • Identify economic growth opportunities
  • Improve the lives of poor people
  • Create the markets of the future

MCC relies heavily on its work with private sector organizations. Carl Sangree, Head of Finance, Investment and Trade (FIT) at MCC, says “When we begin a project, by law we have only five years to complete it. So, having the private sector carry the project forward is clearly a good thing.”

FIT for purpose

One of the agency’s key principles is that private investment is the real engine for economic growth. “What we’re focused on is trying to mobilize private investment, and this group has been re-oriented to really prioritize this in and around our projects, starting at an earlier stage of the compact development process,” says James Hallmark, a member of the FIT unit.

Such “compacts” are large, five-year grants set up to fund specific programs in countries that pass MCC’s eligibility criteria. The country creates a local accountable entity to manage and oversee all aspects of implementation.

MCC also pursues complementary investment during compact implementation and after completion. It actively engages the private sector in its programs in three ways:

  • Requires partner countries to involve business and civil society stakeholders during program development and implementation
  • Fosters business start-up and expansion through projects targeting policy reform, private enterprise financing financial sector development, and private participation in provision of public services
  • Ensures procurement opportunities are fair, open and competitive, and that US companies are aware of potential business opportunities

Stephen Gaull, another FIT team member, says that both MCC and private sector organizations stand to benefit. “Companies want to work with us because we’re in markets where they are, or where they want to be because these countries have a certain social, political and economic stability that is ripe for growth. What we’re focused on is addressing key problems that limit businesses.”

Measuring success

Since its launch, MCC has approved over US$9.3b in global programs that support country-determined projects. More than 210,000 farmers have been trained and over 3,500 enterprises assisted, more than 4,900 km of roads are under design or in construction, and more than US$83m has been disbursed in agricultural loans.

This performance is partly due to the rigorous monitoring and evaluation program in place since day one of MCC’s operations. 

“Most of the problems we face are multi-billion dollar challenges. But if we’re successful, then our investments can create the conditions for others to do business, make larger investments in the future, increase the level of economic activity and improve standards of living,” concludes Sangree.