This document provides an overview of the way MCC conducts due diligence on community-based or community-driven development programs.
Investing in people is an important condition for sustained economic growth. It is a process of enhancing people’s choices by expanding their capacities to lead healthy lives, be knowledgeable, and be able to come together to address common problems. These priorities are reflected in MCC’s country selection criteria.
However, investing in people requires more than building human capital in health and education; it requires building social capital within communities as well. Social capital refers to the institutions, relationships, and norms that shape the quality and quantity of communities’ social interactions. Evidence shows that social cohesion is critical for societies to prosper economically and for development to be sustainable.
Community development treats communities as the point of departure for development and poverty reduction rather than as the passive recipients of programs. Communities are empowered to make local decisions and are given the resources necessary to craft local solutions. Decades of experience have shown that given access to information, support to build capacity, and investment resources, poor communities can effectively work together to improve their lives. By focusing on community capacity building as well as building community assets, community development produces community buy-in, empowers communities to drive their own development processes and thus promotes the effectiveness, efficiency, and sustainability of investments.
MCC expects proposals for MCA funding to emphasize those interventions that support economic growth and enhance labor and productivity, particularly for the poor. Projects must clearly indicate how the activity will impact both short-run (5 – 7 years) and long-term (7 years and beyond) opportunities for economic growth. Proposed projects must be in compliance with MCC’s Environmental Guidelines and Gender Policy.
As community driven development focuses on process as well as particular outcomes, projects can span a wide-range of sectors and are often multi-sectorial in nature. Current MCC community development projects include competitive community infrastructure grants and block grants for health and nutrition. Other possible community development projects include:
- Building schools, latrines, or teacher housing
- Establishing Community Schools
- Community management/involvement in school management
- Adult/Continuing Education
- Building health centers and ancillary structures
- Block grants to communities contingent on improved community-level behavior
- Community participation in health sector management
- Village savings and loans programs
- Village/local insurance program
Agriculture and Natural Resource Management
- Community forests
- Management of communal land
- Farming cooperatives
- Income generating livelihood activities
- Training for improve and/ or alternative livelihoods
In general terms, due diligence can begin once all the required components of a Concept Paper have been received. Hallmarks of a strong proposal include thorough review of the targeted sector or sectors, assessment of past efforts to date to address problems in those sectors or in community development, assessment of social and gender related community needs and outcomes, review of constraints to community mobilization, and emphasis on evidence-based community development interventions.
The proposal will also respond directly to the Constraints Analysis and include:
- Thorough description of the physical (population or geographic region affected), social, gender and economic dimensions of the problem, including how the government has tried to address the problem.
- Sector specific indicators, if available, that will provide a dimension that will quantify the magnitude of the problem and serve as measures of the effectiveness of the solution. This data should be analyzed by gender whenever possible. Gender indicators should be included as appropriate.
- Impacts of the proposed activity on financial and human resources in proposed sectors (including demographic or geographic target populations of beneficiaries and the process for selecting them). If possible, present sex-disaggregated data.
- Regulatory, policy or legislative changes required, including steps necessary to secure these changes.
- Likely poverty and gender impacts of the proposed activity.
- Country (or comparable) studies or data on economic returns for the specified interventions.
- Initial cost-benefit analysis.
- Detailed risk analysis on all proposed investments with a particular focus on fiduciary risk.
- Criteria and process used to select specific institutions for intervention.
- Performance data on institutions or systems (e.g. impact evaluation results from past projects).
- Past and potential roles for private stakeholders in improving efficiency, equity, quality and maximizing impacts of public expenditures.
- Potential demand-side and supply-side financing strategies to ensure the project’s long-term sustainability; including opportunities for results-based financing.
- Opportunities to leverage or complement other donor interventions.
Due Diligence Questions
Following acceptance of the Concept Paper, MCC’s Education, Health, and Community Development Group will begin due diligence on the proposed investments. Below are examples of questions which are pursued during the due diligence phase (as relevant to the sub-sector). As possible, this information would already be incorporated into the Concept Paper:
Community development is a process that involves the interaction and cooperation of central and local government as well as community organizations. Community development envisages devolving power from the center to the local level. This requires an inventory of institutional relations and capacities:
- Is central government accustomed to a coordination rather than implementation role?
- To which extent is local government accountable to its citizens and to community organizations? To what extent is it accountable to the central government?
- Is local government currently capable of administering service delivery? Could it effectively manage increased responsibility?
- Is central government transferring an adequate share of financial resources to local governments?
- What sector (health, education, agricultural extension, etc.) policies would affect (hinder or enhance) a community development project? These could include staffing, budgeting, lines of authority, performance incentives or lack thereof.
- Do local governments have the legal authority, willingness, and capability to levy taxes?
- Is there a culture and history of collective action? What local groups (community-based organizations, non-governmental organizations, faith-based organizations) exist? Which are active? How influential are they?
- Are communities familiar with participatory analysis/decision-making procedures?
- What is the poverty profile of the country?
- How could the program be targeted to those most in need so as to achieve maximum impact? Should the program be targeted regionally? To specific ethnic or minority groups? To girls?
- Does the project design clearly identify economic and social benefits from the proposed project? How will economic gains be apportioned among project beneficiaries?
- Have stakeholder analysis and adequate consultation been undertaken?
- Will the proposed activity strengthen coverage and access to key services for the poor?
- Have both supply side and demand side constraints to project achievement been assessed?
- What is the evidence for the effectiveness of proposed community based interventions?
- Has the role of the private sector in meeting this objective been assessed? Have opportunities for partnering with/strengthening private sector response been included?
- Have constraints to project effectiveness and sustainability been adequately identified and addressed?
- Are behavioral change objectives appropriately identified and resourced?
- Have project risks been identified and mitigated in project design?
- Have intergenerational issues been assessed and addressed?
- Have gender issues been considered and have gender concerns been integrated into project objectives and activities?
- To what extent are other donors engaged in related activities? How will coordination be ensured?
- To what extent will fiscal, legal or administrative policies constrain project success? Have these constraints been mitigated or will they be changed through project activities?
- How will any proposed pilot projects or impact evaluations relate to or contribute to state of the art knowledge in community development?
- Are project governance and implementing structures clearly defined? Have institutional capacities been assessed and constraints mitigated?
- What is the plan for mitigating the particularly complicated fiduciary risk involved in community development projects?