Reducing Poverty Through Growth

Fact Sheet

April 18, 2005 www.mcc.gov

Madagascar and Millennium Challenge Corporation:

Building a Dynamic Partnership for

Poverty Reduction through Economic Growth

Millennium Challenge Corporation (MCC) and the Republic of Madagascar have signed a four-year, nearly $110 

million dollar Compact.

The Millennium Challenge Account (MCA) grant to Madagascar will support a program designed to raise 

incomes by bringing the rural population from subsistence agriculture to a market economy. The program 

includes three projects that will work together to help rural Malagasy secure formal property rights to land, 

access credit and protect savings, and receive training in agricultural production, management and marketing 

techniques. This integrated three-pronged approach will provide the rural population with the necessary conditions to use the land productively, to build profitable businesses and help ensure environmental sustainability.

Madagascar’s Vision

Madagascar was one of sixteen countries—from a pool of sixty-three countries—selected to apply for MCA 

assistance based on its policy performance in governing justly, investing in citizens, and encouraging economic 

freedom as measured by 16 objective indicators. Madagascar’s Government took advantage of this opportunity 

by consulting with its citizens, establishing a vision of what they wanted to accomplish, putting a team in place 

and working with MCC to make that vision a reality.

To understand the priorities of its people, Madagascar’s Government held a national workshop, attended by 

more than 350 people, to describe the MCA and discuss obstacles to economic growth and poverty reduction. 

The Malagasy government then organized regional consultative workshops to exchange ideas, ran radio and TV 

broadcasts about the MCA and solicited on-air input. It published newspaper advertisements that announced 

meetings and called for submission of proposal ideas. 

Fighting Poverty

Over 80% of Madagascar’s people live on less than $2 a day and, according to the United Nations, it is one of the 

27 least developed countries in the world. Two major obstacles to poverty reduction and economic growth in 

Madagascar are a poorly functioning banking system and a weak land-titling system. These obstacles prevent 
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Fact Sheet: Madagascar April 18, 2005 2

access to credit and essential business services, block rural investment, and stifle the ability of rural families to 

meet their own aspirations and have a stake in local institutions. 

MCC’s mission is to fight poverty by helping countries to boost economic growth and opportunity. In the case 

of Madagascar, MCC funds will help the Malagasy attain:

Secure Access to Property: Formalize the land tenure system (e.g., titling and surveying), modernizing the national land registry, and expanding services to rural citizens;

Access to Credit: Improve a weak banking system to make essential financial services available to rural areas, 

improve credit skills, and cut delays in payments for goods and services from 45 to 3 days; and

Access to Information: Establish a project that identifies investment opportunities for rural Malagasy in local, 

regional, or international markets, and trains farmers and other entrepreneurs in production, management, and 

marketing techniques.

Measuring Results

MCC’s compact with Madagascar focuses on a few key measurable indicators of progress towards achieving 

sustainable growth and poverty reduction. Due to a lack of baseline data and the importance of measuring 

results to both MCC and Madagascar, the first dime that MCC will spend since its establishment is close to $1 

million for baseline surveys of households, farms, and enterprises. The program will use this baseline data and 

follow-up surveys to track:

•	 increases in household income, 

•	 increases in agricultural productivity, and 

•	 increases in investment. 

Initial economic analysis estimates that household income will increase by five percent of the average land value 

in each of the targeted areas. 

In order to see if progress is being made on these outcomes, MCC and Madagascar have agreed on several 

interim indicators. The program aims to secure property rights for approximately 250,000 hectares of land, 

benefiting about 62,000 households, increase lending in the target areas by about $30 million, and significantly 

increase the number of rural producers that adopt new technologies or engage in higher value production. 

These indicators, together with others at the individual project activity level, will be used to evaluate the im-
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Fact Sheet: Madagascar April 18, 2005 3

pact of the program outlined in the MCC-Madagascar Compact and to monitor the progress made during its 

implementation.

Financial Responsibility 

MCC and Madagascar have designed a rigorous budget and control system to ensure fiscal accountability. Funds 

control for the MCA Program will be managed by a separate fiscal agent identified using a competitive process. 

Madagascar’s recently written procurement law will be the basis for governing procurements in the Compact. 

Disbursements will be made periodically based on performance, projected cash requirements, and compliance 

with provisions in the Compact and related documents. 

Working as Partners 

Less than six months after Madagascar submitted its proposal to MCC (October 2004), a development investment deal was reached and approved by MCC’s Board. Throughout, MCC engaged and worked cooperatively 

with the Malagasy as they refined their proposal, consulted with their citizens and with other donors, and determined measurable objectives.

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Millennium Challenge Corporation (MCC), a United States government corporation designed to work with some of the 

poorest countries in the world, is based on the principle that aid is most effective when it reinforces good governance, 

economic freedom, and investments in people that promote economic growth and elimination of extreme poverty