MCC should ensure that realistic and credible assumptions are used in its economic rate of return (ERR) models, and MCC should provide guidance and due diligence to verify the economic logics behind ERR models. The assumptions that were the basis for the ERRs for the three cocoa grants were overly optimistic. For example, grantees assumed greater use of improved inputs through improved access to financing, although low take-up rates significantly reduced project impacts. One grant encouraged farmers to ferment cocoa beans so that smallholders could earn increased margin, an approach that lacks economic foundation as the change in margin is not an economic benefit, but a transfer from agro-processors to smallholders. Moreover, smallholders lacked the skills or the scale to make the fermentation intervention successful. The ERRs, thus, did not accurately reflect the expected benefits of the interventions.
Lesson Learned