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The Millennium Challenge Corporation (MCC) and Global Health

Key Facts

  • The Millennium Challenge Corporation (MCC) is an independent U.S. foreign assistance agency that has the goal of reducing poverty in developing countries through supporting economic growth. Since its creation in 2004, MCC has supported development programs in 40 low- and lower-middle-income countries.
  • MCC has a unique approach among U.S. foreign assistance agencies in that it works only with countries that are deemed “eligible” after meeting certain benchmark measures for good governance, economic freedom, and investing in people, and it provides assistance through formal bilateral agreements negotiated and developed in a “country-led” process.
  • The MCC portfolio of projects spans many sectors of development, including global health. MCC recognizes health as important to its poverty reduction mission and has supported a number of global health projects in a range of countries.
  • Still, its financing for global health to date has been modest, with only a small proportion of MCC funding directed to health projects, often as a component of a broader package of interventions. Although the proportion of funding going to health has increased in recent years, from FY 2008 (1%) to FY 2013 (18%), it fell in FY 2014 (12%).
  • Even so, in recent years MCC has expanded its partnerships with other U.S. agencies working in global health to improve coordination and share best practices.

MCC Overview

Based in the Executive Branch, MCC is an independent U.S. foreign assistance agency, specifically a U.S. government corporation established in January 2004 by the Millennium Challenge Act of 2003.1,2 Its purpose is to reduce poverty by promoting economic growth in low- and lower-middle-income countries through the development of country assistance agreements, which are meant to be driven by country-identified priorities for U.S. government support.3

Approach

MCC’s approach is considered unique among U.S. development agencies for several reasons, including its use of quantitative benchmarks to determine eligibility, a heavy emphasis on country-led planning and implementation of assistance agreements, and a reliance on robust and transparent monitoring and evaluation of progress and impact of its assistance.4 The agency has also been seen as early champion of gender dimensions of development, having adopted its first gender policy in 2006 and long recognizing gender inequality as “a significant constraint” to achieving its mission.5,6

Board of Directors

MCC is led by a chief executive officer (CEO) – a Presidential appointee requiring Senate confirmation – and overseen by a Board of Directors consisting of five members from the U.S. government and four members from the private sector. U.S. government members include:

  • the Secretary of State,
  • the Secretary of the Treasury,
  • the U.S. Trade Representative,
  • the Administrator of the U.S. Agency for International Development (USAID), and
  • the CEO of MCC.

Private sector members are nominated by the President and confirmed by the U.S. Senate.7

Country Selection Process

The MCC Board carries out a multi-tiered country selection process, by first identifying candidate countries and then assessing their eligibility to apply for assistance.8 Candidate countries are identified based on per capita income. Only low- and lower-middle-income countries, according to World Bank income classifications, are considered candidates. Eligible countries are selected from these candidates based on their demonstrated commitment to policies related to MCC’s three key areas:

  • “Ruling Justly,” which includes good governance and fighting corruption,
  • “Economic Freedom,” and
  • “Investing in People,” which incorporates several measures of population well-being including some related to health.
Eligibility Indicators and Country Scorecard

To determine eligibility and gauge country commitment to key principles, MCC relies on more than 20 quantitative indicators of policy and performance. Three of these eligibility indicators are health-focused:

  • public expenditure on health,
  • immunization rates, and
  • “child health” (a composite indicator that includes child mortality rate, percent with access to water, and percent with access to sanitation).9

How a country performs against all indicators (known as a “country scorecard”) helps determine whether they are eligible for MCC assistance. The MCC Board can also consider two other factors in its decision: the opportunity to reduce poverty and generate economic growth within a country, and the availability of MCC funds.10

Types of Assistance

Since its creation in 2004, MCC has supported development programs in 40 low- and lower-middle-income countries.11 MCC assistance is provided through two types of agreements: compacts and thresholds.12,13

Compacts are larger agreements that can span multiple sectors and which typically last five years. To be eligible for compact funding, a candidate country must score above the median compared to other countries in its income group (e.g., other low-income countries) with regard to at least 10 of the eligibility indicators, including two required indicators:

  • above median performance on “corruption” and
  • meeting a minimum standard for either the “civil liberties” or “political rights” indicators (or both).

Through May 2017, MCC has signed 33 compacts with 27 countries (some countries have signed a second compact after the first ended), for amounts ranging from $66 million to $698 million.14

Thresholds are smaller, targeted, shorter-term grants designed to help countries become compact-eligible. A candidate country not meeting the criteria for a compact but demonstrating commitment to improving its performance may be eligible for threshold funding. MCC has signed 26 threshold agreements with 24 countries (some countries signed a second threshold agreements after the first ended), for amounts ranging from $6.7 million to $55 million.15 Nine countries have successfully transitioned from receiving threshold funding to subsequently signing a compact.16  

U.S. Government Funding

First funded by Congress at $994 million in FY 2004, MCC appropriations reached a peak of $1.75 billion in FY 2006 and FY 2007. Since then, appropriated funding for MCC has fluctuated somewhat (see Figure 1). In FY 2017, Congress appropriated $905 million for MCC. In the past, Congress has typically appropriated less than the President’s request each year. The current Administration has requested reduced funding of $800 million for MCC in FY 2018.17

Figure 1: Millennium Challenge Corporation (MCC), FY 2006-FY 2018 Request

Since 2004, MCC has committed $14 billion in assistance through its compact and threshold agreements. Most MCC funding has been provided through compacts (96%), with a smaller proportion provided through thresholds (4%).18

MCC Support for Global Health

The MCC portfolio of projects spans many sectors of development, including global health. MCC recognizes health as important to its poverty reduction mission and has supported a number of global health projects in a range of countries.19 Global health activities (defined as those that support health and/or water and sanitation investments) have been a part of 12 compacts and five threshold agreements, spanning 16 countries.

From FY 2004 through FY 2017, MCC has committed almost $1.5 billion to projects focused on health and/or water and sanitation combined, which equals almost 11% of total committed funding. Around $307 million of this amount has been for health-specific projects, while $1.182 billion has been directed to water and sanitation.20 See Table 1.

Looking at disbursements, the share of funding for global health grew from FY 2008 (1%) to FY 2013 (18%) but fell in FY 2014 (12%); see Figure 2.21

Figure 2: MCC Disbursements for Health and All Other Sectors, FY 2008-FY 2014

Health Projects

Health projects (other than water and sanitation) have been included in four compacts and four threshold agreements with seven countries. Funding for these projects made up varying proportions of each agreement’s total funding, ranging from 0.4% of Namibia’s compact funding to 36% of Indonesia’s threshold funding (see Table 1).22 Some examples of health projects supported by MCC are:

  • Lesotho’s compact (completed 2013) supported the renovation and expansion of HIV/AIDS treatment clinics, a new central laboratory facility, and improvements to tuberculosis control and maternal and child health.23
  • Mongolia’s compact (completed 2013) included investments in prevention and management of non-communicable diseases.
  • Namibia’s compact (completed 2014) included support for targeted HIV/AIDS education programs.
  • Threshold programs in Peru (completed 2010) and Timor Leste (completed in 2014) have included efforts to improve childhood immunization, while Indonesia’s compact (ongoing) includes funding for childhood nutrition.

Water & Sanitation Projects

Water and sanitation projects have been included in nine compacts and one threshold agreement with ten countries. As a proportion of total country compact funding, support for these projects ranged from 2% of Ghana’s compact funding to 100% of Zambia’s compact funding (see Table 1). Some examples of water and sanitation projects supported by MCC are:

  • Jordan’s compact (completed 2016) has sought to rehabilitate the water supply and distribution network, improve sewage systems, and expand wastewater treatment.
  • Mozambique’s compact (completed 2013) focused, in part, on investments in rehabilitation of urban water supply systems.
  • Tanzania’s compact (completed 2013) aimed to supported improving potable water supply in two urban areas.
  • Cabo Verde’s compact (ongoing) is largely focused on water infrastructure and regulation of the country’s water sector, while Zambia’s compact (ongoing) focuses on improving water and sanitation infrastructure, management, and policy.
Table 1: MCC Compacts/Thresholds with Health and Water & Sanitation Projects, FY 2004-FY 201724
Country Type of Agreement Year Signed Project Focus Project Funding
in $ millions
Total Agreement Funding
in $ millions
Project Funding as % of Total
Completed
Georgia Compact 2005 Large systems* $53.0 $395.3 13.4%
Ghana Compact 2006 Basic drinking water supply and sanitation 13.0 547.0 2.4
El Salvador Compact 2006 Basic drinking water supply and sanitation 19.0 461.0 5.1
Indonesia Threshold 2006 Child health (immunization) 20.0 55.0 36.4
Jordan Compact 2010 Large systems*; basic drinking water supply 253.8 275.1 92.2
Kenya Threshold 2007 Health care procurement and delivery 4.0 12.7 31.5
Lesotho Compact 2007 HIV/AIDS; maternal and child health; TB 122.4 362.6 33.8
Water resources protection, policy 164.0 45.2
Mongolia Compact 2007 Non-communicable diseases 17.0 285.0 6.0
Mozambique Compact 2007 Large systems; basic drinking water supply 203.6 506.9 40.2
Namibia Compact 2008 HIV/AIDS education 1.3 304.5 0.4
Peru Threshold 2008 Child health (immunization) 11.5 35.6 32.3
Tanzania Compact 2008 Large systems* 63.3 698.0 9.5
Timor-Leste Threshold 2011 Child health (immunization) 2.6 10.5 24.8
Ongoing
Indonesia Compact 2011 Child health/nutrition 131.5 600.0 21.9
Cabo Verde Compact 2012 Water, sanitation and hygiene 41.1 66.2 62.1
Zambia Compact 2012 Water supply, sanitation, and drainage 354.8 354.8 100.0
Sierra Leone Threshold 2015 Large system; basic drinking water supply 16.0 44.4 36.0
NOTES: Funding in millions. As of January 2017. *Large systems refers to investments in water and sanitation infrastructure. “ indicates total agreement funding is same as above, since projects are part of single agreement.

Coordination with Other U.S. Efforts

MCC has made efforts to coordinate with other U.S. foreign assistance agencies on health. For instance, through its compact with Lesotho focused on HIV/AIDS and other health issues, MCC coordinated with President’s Emergency Plan for AIDS Relief (PEPFAR, the U.S. government’s response to global HIV/AIDS) programs in-country.25

In turn, MCC has served as a resource for other agencies seeking to learn from its approach. For example, MCC has partnered with the State Department’s Office of the Global AIDS Coordinator (OGAC), which administers PEPFAR, to promote mutual learning on country ownership and sustainability of foreign assistance. The two agencies signed a memorandum of agreement in March 2014, with MCC agreeing to provide technical assistance and other support to PEPFAR programs over the next three years.26 This partnership was expected to help PEPFAR programs strengthen efforts to promote country ownership and sustainability through PEPFAR Country Health Partnerships. Further, in December 2014, MCC and OGAC announced they would work together to establish “data hubs” in PEPFAR partner countries, a $22 million project that launched in April 2015 with a three-year timeframe.27

Key Issues for the U.S.

MCC, once considered a novel approach to U.S. foreign assistance, is now embarking on its second decade. Going forward, the agency faces a number of opportunities and challenges. Sustainability of funding for MCC remains a concern, especially in light of tight federal foreign assistance budgets and the reduced funding requested by the Administration.28 While MCC has recognized the value of health for development, most of its funds in this area have focused on water and sanitation infrastructure projects, with only a small portion going to health projects. Still, the agency’s more recent efforts to coordinate MCC activities with those of other U.S. agencies, including PEPFAR, demonstrate a commitment to taking advantage of more opportunities to become engaged in global health.

Endnotes
  1. Millennium Challenge Act of 2003 (P.L. 108-199).

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  2. MCC, About MCC, webpage, https://www.mcc.gov/about.

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  3. State Department, The U.S. Commitment to Development, fact sheet, July 2009.

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  4. MCC, About MCC, webpage, https://www.mcc.gov/about; CGD, Overview of the Millennium Challenge Corporation, Jan. 2015; CGD, “Millennium Challenge Corporation,” Foreign Assistance Agency Brief, April 2017.

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  5. MCC, Gender Equality and Poverty Reduction through Growth, Principles into Practice issue brief, Sept. 2012, https://www.mcc.gov/resources/doc/principles-into-practice-gender-equality-and-poverty-reduction-through-grow.

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  6. Per MCC guidelines that provide operational guidance to countries in this area: MCC, Gender Integration Guidelines, March 2011.

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  7. MCC, “About MCC: Board of Directors,” webpage, https://www.mcc.gov/about/org-unit/board-of-directors.

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  8. CRS, Millennium Challenge Corporation, RL32427, Jan. 2017.

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  9. MCC, Selection Indicators, webpage, https://www.mcc.gov/who-we-fund/indicators.

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  10. MCC, Selection Criteria, webpage, https://www.mcc.gov/who-we-fund.

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  11. KFF analysis of data from MCC, FY 2016 Annual Performance Report and Plan, Appendix A, MCC FY 2018 Congressional Budget Justification, 2017.

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  12. MCC, Country and Country Tools, https://www.mcc.gov/where-we-work.

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  13. MCC, Do Business With MCC Partner Countries, webpage, https://www.mcc.gov/work-with-us/mcc-partner-countries.

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  14. Eleven compacts are currently active: Benin (its 2nd), Cabo Verde (2nd), El Salvador (2nd), Georgia (2nd), Ghana (2nd), Indonesia, Liberia, Malawi, Morocco (2nd), Niger, and Zambia. Compacts in Madagascar (2009) and Mali (2012) were terminated due to coups. Compacts with 20 countries have been fully completed: Armenia, Benin (its 1st), Burkina Faso, Cabo Verde (1st), El Salvador (1st), Georgia (1st), Ghana (1st), Honduras, Jordan, Lesotho, Moldova, Mongolia, Morocco, Mozambique, Namibia, Nicaragua, Philippines, Senegal, Tanzania, and Vanuatu. MCC. MCC, FY 2016 Annual Performance Report and Plan, Appendix A of the MCC FY 2018 Congressional Budget Justification, 2017.

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  15. There are three currently active threshold programs: Guatemala, Honduras, and Sierra Leone. Two countries (Mauritania and Yemen) have had their eligibility terminated before their programs were implemented. Niger’s threshold was suspended in 2009 for government behavior contrary to MCC criteria but reinstated in 2011. CRS, Millennium Challenge Corporation, RL32427, Jan. 2017; MCC, FY 2016 Annual Performance Report and Plan, Appendix A, MCC FY 2018 Congressional Budget Justification, 2017.

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  16. The nine countries that have completed thresholds and moved on to compacts are: Burkina Faso, Indonesia, Jordan, Liberia, Malawi, Moldova, the Philippines, Tanzania, and Zambia. CRS, Millennium Challenge Corporation, RL32427, Jan. 2017.

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  17. Kaiser Family Foundation (KFF) analysis of data from the Office of Management and Budget, Agency Congressional Budget Justifications, Congressional Appropriations Bills, and U.S. Foreign Assistance Dashboard website, ForeignAssistance.gov.

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  18. KFF analysis of data from MCC, FY 2016 Annual Performance Report and Plan, Appendix A, MCC FY 2018 Congressional Budget Justification, 2017.

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  19. MCC, MCC Supports Global Health Initiatives, July 2009.

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  20. KFF analysis of data from MCC, FY 2016 Annual Performance Report and Plan, Appendix A, MCC FY 2018 Congressional Budget Justification, 2017; MCC, “Programs and Activities,” webpage [no longer publicly available – accessed July/August 2015]; CRS, Millennium Challenge Corporation, RL32427, Jan. 2017; and MCC, Sierra Leone Congressional Notification, Sept. 2, 2015.

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  21. FY 2014 is the most recent year with complete data. KFF analysis of data from U.S. Foreign Assistance Dashboard website, ForeignAssistance.gov.

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  22. KFF analysis of data from MCC, “Programs and Activities,” webpage [no longer publicly available – accessed July/August 2015].

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  23. MCC, MCC and PEPFAR: Working in Partnership with Lesotho to Improve Healthcare, Feb. 2009, https://www.mcc.gov/our-impact/story/story-story-mcc-makes-headway-mcc-and-pepfar-working-in-partnership-with-le.

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  24. KFF analysis of data from MCC, “Programs and Activities,” webpage [no longer publicly available – accessed July/August 2015]; CRS, Millennium Challenge Corporation, RL32427, Jan. 2017; and MCC, Sierra Leone Congressional Notification, Sept. 2, 2015.

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  25. MCC, MCC and PEPFAR: Working in Partnership with Lesotho to Improve Healthcare, Feb. 2009, https://www.mcc.gov/our-impact/story/story-story-mcc-makes-headway-mcc-and-pepfar-working-in-partnership-with-le.

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  26. MCC, MCC and PEPFAR Partner to Transform Country Assistance Programs, press release, March 2014,  https://www.mcc.gov/news-and-events/release/release-0321140-mcc-and-pepfar.

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  27. MCC, MCC and PEPFAR Partner to Create Local Data Hubs, fact sheet, Dec. 2014; MCC, “MCC-PEPFAR Partnership,” webpage, https://www.mcc.gov/initiatives/initiative/mcc-pepfar-partnership.

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  28. See also CSIS, The Millennium Challenge Corporation in the Trump Era: Don’t Place Unrealistic Responsibilities onto MCC, Feb. 2017.

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