MCC investments should have a sound economic justification and undergo proper problem identification. The cocoa grant portfolio suffered from a lack of strong justification. The problem statement for this intervention is that the Indonesian cocoa sector, which includes 1 million smallholder farmers, is suffering from declining quantity and quality of cocoa beans. The proposed solution was to incentivize the private sector to invest in the Indonesian cocoa sector by matching investments 50%-50% with MCC. However, further consideration was required. The private sector had already been investing in the Indonesian cocoa sector for decades. MCC should have further examined the underlying market failure for the proposed problem to determine whether MCC should have invested in this intervention. No root cause analysis was carried out to justify this decision.
Lesson Learned