Podcast Summary: The CGD Podcast

Episode: A New Strategy for the MCC – Nancy Lee and Sarah Rose

Date: March 8, 2016
Host: Rajesh Merchandani, Center for Global Development (CGD)
Guests: Nancy Lee (Deputy CEO, MCC), Sarah Rose (CGD Analyst & MCC Expert)

Overview

This episode explores the Millennium Challenge Corporation's (MCC) new strategy for reducing global poverty through economic growth. Host Rajesh Merchandani is joined by Nancy Lee and Sarah Rose to discuss how MCC is adapting to emerging global development challenges, such as concentrated poverty in fragile states, climate change, urbanization, and the role of private and domestic financing. They examine the priorities of MCC's updated approach, with a particular focus on leveraging policy reform, measuring systemic impacts, and ensuring country ownership.

Key Discussion Points & Insights

1. The Motivation and Goals Behind MCC’s New Strategy

[00:05–02:22]

• The MCC, entering its "teenage years," faces a transformed global development landscape: fewer poor countries, more poor people within countries, increased urbanization, fragility, and new financing sources.

• Nancy Lee outlines that with 12 years of experience and a proven model, MCC is pivoting to address current realities:

  • "We now are at a point where we have a 12 year track record. We have...proof of concept. We have made a model which was ambitious in theory, actually work in practice. So it is a good time to...step back and respond to the new challenges..." (Nancy Lee, [01:09])

• MCC's reframed strategy involves five major goals, 38 priority actions, and 19 new directions, all aimed at expanding the model’s impact, especially via deeper leverage and partnerships.

2. Deepening the “Poverty Reduction Through Economic Growth” Model

[02:22–03:15]

• The strategy is fundamentally about leveraging scarce grant resources to catalyze more private financing and strengthening reform incentives through country collaboration.
• "How can we create greater leverage, use these very scarce grant resources to catalyze more private finance? How can we really strengthen reform incentives?...work very collaboratively...with countries on reform agendas." (Nancy Lee, [02:46])

3. Emphasis on Policy Reform in the New Strategy

[03:46–06:01]

• Sarah Rose notes increased emphasis on policy reform, though the idea itself isn't entirely new for MCC.

  • "In a way, there’s more emphasis...I'd like to hear a little bit more about how the increased emphasis on reform is going to be a little bit different than MCC's past history using conditions as part of its compact." (Sarah Rose, [04:04])

• Nancy Lee breaks down MCC's approach:

  • Help countries identify the most important infrastructure investments.
  • Create enabling environments for private investment through policy and institutional reforms.
  • Invest in early-stage project development and fill financing gaps.
  • "Because we can do all three things, we can be particularly catalytic in terms of mobilizing finance...recent compacts in Benin and Ghana and Jordan, for example, where we invested about a billion dollars and we're catalyzing about 5 billion." (Nancy Lee, [06:05])

4. Sustainability and Embedding Systemic Change

[07:13–08:37]

• Ensuring reforms and benefits persist after MCC funding ends is a priority.
• Focus on building or reforming systems (e.g., road maintenance, land titling) so countries can replicate successes.
• "We want to focus more on making these reforms sustainable and embedding them into country systems so that...the effect of the compact lasts long after our financing ends." (Nancy Lee, [07:13])

5. Country Ownership and Results Orientation

[08:37–11:09]

• Host raises the potential tension between policy conditions and country ownership.
• Nancy Lee reinforces local responsibility: "If they've accepted the policy reform, they have the responsibility, they own it...they speak about the compact as their compact." ([09:16])
• Sarah Rose pushes for clarity on how these reforms tie into MCC's results-focused approach, suggesting outcome-based payments could ensure accountability and adaptability: "In a way, I think this calls for more focus on actual outcomes-based payments..." ([10:01])

6. Defining and Measuring Systemic Impact

[11:09–12:25]

• MCC is working to define "systemic impact"—covering policy/institutional change, behavior change, and scaling/replication.
• Nancy Lee emphasizes ambition and innovation in results measurement and outcome-based finance:
  • "We...view that kind of innovation in development finance as very consistent with our model. We've always been focused on outcomes..." ([11:24])

7. Piloting Outcomes-Based Approaches—Morocco and Sierra Leone

[12:25–14:53]

• MCC is piloting "cash on delivery" or outcomes-based aid:
  • In Morocco (focus: education for girls and at-risk youth), some payments are reserved for measured outcomes.
  • In Sierra Leone (focus: power and water), payments are linked to access improvements and include anti-corruption platforms (e.g., "pay no bribe" e-government system).
• "We're also beginning it in Sierra [Leone] in our recently launched Threshold program...we will link payments to those outcomes." ([13:30])
• Example quotient: "It's an E-government platform where governments are held accountable because there is a public platform where people...can record cases where they’re asked to pay bribes." ([14:20])

8. The Role and Evolution of Threshold Programs

[15:14–16:05]

• Threshold programs, initially seen as too small for major impacts, have proved effective for catalyzing early policy reforms, laying the groundwork for larger investments.

9. Revisiting the Core Question: Does Growth Reduce Poverty?

[16:05–18:23]

• Sarah Rose points out it's still difficult to definitively prove that MCC’s approach increases household incomes, though elements like country ownership and good governance are valuable.
  • "There is not a huge body of evidence showing definitively that MCC’s investments have in fact increased household incomes. It doesn’t mean that they haven’t...This is just hard to...prove." (Sarah Rose, [16:29])
• Nancy Lee shares MCC research suggesting poor populations in MCC countries have higher income growth rates than elsewhere:
  • "Incomes of the poor were growing faster than average per capita income in the countries we work in...the incomes of the poor rise faster in our countries." (Nancy Lee, [17:55])

Memorable Quotes

• On MCC’s evolving approach:
  "We now are at a point where we have a 12 year track record. We have...proof of concept."
  — Nancy Lee ([01:09])

• On leveraging limited resources:
  "How can we create greater leverage, use these very scarce grant resources to catalyze more private finance?"
  — Nancy Lee ([02:46])

• On sustainability:
  "We want to focus more on making these reforms sustainable and embedding them into country systems so that...the effect of the compact lasts long after our financing ends."
  — Nancy Lee ([07:13])

• On country ownership:
  "They speak about the compact as their compact...they are implementing this compact."
  — Nancy Lee ([09:16])

• On the importance of evidence:
  "There is not a huge body of evidence showing definitively that MCC’s investments have in fact increased household incomes...At this point, I think that's still an important question that I hope MCC continues to strive to answer."
  — Sarah Rose ([16:29])

Timestamps for Key Segments

• [00:05] – Introduction & episode theme
• [01:09] – MCC’s track record and rationale for new strategy
• [02:22] – Outlining the five strategic goals
• [03:46] – Policy reform as a renewed priority
• [06:05] – Catalyzing private finance through combined interventions
• [07:13] – Making reforms sustainable and embedded
• [08:37] – Navigating country ownership and policy reform
• [10:01] – Push for outcomes-based approaches
• [11:09] – Defining and measuring systemic impact
• [12:25] – Piloting cash on delivery/outcomes-based payment in Morocco, Sierra Leone
• [14:20] – Anti-corruption platforms in service delivery
• [16:29] – Open questions about measuring results and impact
• [17:55] – MCC’s findings on income growth among the poor

Tone and Style

The discussion is thoughtful and forthright, blending the optimism of successful innovation with the humility to address evidence gaps. Both guests maintain a practical, results-focused tone, emphasizing collaboration, measurement, and adaptation in development policy.

Conclusion

This episode provides an in-depth look at how MCC is reinventing itself to meet global development challenges by focusing on leveraging resources, advancing systemic reforms, piloting innovative outcomes-based financing, and continually asking critical questions about poverty reduction. For those seeking a window into the evolution of US foreign aid, this conversation offers both clarity and candid reflection.