One of the unique aspects of MCC’s evidence-based approach to delivering U.S. foreign assistance is its in-depth economic analysis of its grants, including Cost-Benefit Analysis and Beneficiary Analysis. MCC’s commitment to undertake these analyses and make them publicly available is emblematic of MCC’s focus on transparency and results-based aid.
Cost-Benefit and Beneficiary Analysis
MCC’s Cost-Benefit Analysis, which results in Economic Rates of Return (ERR) used to inform investment decisions, provides an estimate of the total increase in real incomes attributable to a proposed MCC-funded activity relative to the total costs. Beneficiary Analysis is an extension of these efforts, as it attempts to describe which segments of society will realize what levels of forecasted increase in incomes. It is most commonly used to estimate MCC projects’ poverty impacts – or the flow of benefits to various income categories – defined using the World Bank’s international poverty lines. However, Beneficiary Analysis also has broader applicability that allows an assessment of forecasted impact on populations of particular interest, such as women, ethnic or religious minorities, the aged, or children. MCC conducts this deeper beneficiary analysis when it is of particular relevance for a given investment.
More about the Definition of MCC Beneficiaries
MCC considers beneficiaries of its investments to be those individuals who realize economic gains, preferably in the form of higher real lifetime income, that are attributable to an MCC-funded project. In other words, beneficiaries are those who experience a benefit represented by a benefit stream in the Cost-Benefit Analysis. Included in MCC’s count of beneficiaries are the families of project participants who are expected to realize higher real lifetime income due to the project. This reflects the underlying assumption that all household members benefit when one household member earns additional income.
Many individuals may participate in MCC-funded programs, such as by providing training, investing in a project, or gaining employment through an MCA construction contract, but not all are counted as beneficiaries. Other people may enjoy non-pecuniary benefits of MCC-funded projects, such as improved teaching environments, more convenient access to water services, or smoother road travel to visit relatives. However, the intended beneficiaries in these examples would be pupils whose employment outcomes improve, household members with lower exposure to and incidence of water-borne disease, and business owners able to access markets more cheaply. Depending on the context and severity of other constraints, only a portion of these intended beneficiaries will realize higher real incomes and be counted as beneficiaries in MCC’s analysis. For example, not all individuals who receive MCC-supported training will obtain higher paying jobs or improved farm profits; not all beneficiaries of a land title will use it for economic gain; and not all formerly malnourished children will experience improved income growth.