When my wife and I relocated from D.C.’s Logan Circle to Capitol Hill five years ago, the most tumultuous change in our lifestyle (aside from my not being able to walk to Brookings every day) concerned the much farther distance we’d have to travel to the nearest supermarket. We had the luxury of shopping at a very nice, if spendy, grocery store about two blocks from our home, which meant that we often did “just-in-time” dinner shopping on the way home from work. Now we were moving to a house where the distance to the nearest supermarket was 1.5 miles, not so walkable at 7 pm.

Did we live in a “supermarket desert?” On the one hand, Capitol Hill is a pretty densely populated part of D.C., so 1.5 miles felt like a long way. And while the Hill is an economically diverse area, it’s large with significant pockets of affluence. On the other hand, like a lot of our neighbors, we own a car. So while nightly trips to the supermarket were out, it was hardly an onerous trip on the weekends.

There are, however, many communities nationwide in which that trip to the supermarket is a long one, and most have much lower incomes than the Hill. That’s the conclusion from new research we conducted with help from The Reinvestment Fund (TRF), a community development financial institution and research organization based in Philadelphia. TRF played a lead role in designing and implementing the Pennsylvania Fresh Food Financing Initiative, a program that provides grants and low-cost capital to facilitate the location of new supermarkets and fresh food retailers in that state’s underserved communities. That initiative is now the model for several other state and local programs, as well as the inspiration for a major new federal budget initiative that seeks to improve community health and economic development outcomes through supermarket attraction and expansion.

With TRF, we looked at 10 metro areas across the country, ranging in size from Jackson, Miss. to Los Angeles. Unlike a lot of previous research that attempted to identify “food deserts,” TRF’s analysis looks at factors beyond distance to a supermarket that matter for access, including a community’s population density and level of car ownership. And it uses household income and expenditure data to help pinpoint the communities that have a significant untapped local demand for supermarkets.

Across the 10 metro areas, about 1.7 million people (5 percent of total population) live in low- and moderate-income communities that are significantly underserved by supermarkets. African Americans, children, and very low-income families are over-represented in these areas. Greater Los Angeles alone accounts for half a million of the underserved; and in the Cleveland metro, more than one in nine residents lives in a low-supermarket-access community. Estimates suggest that upwards of $2.6 billion annually in grocery expenditures may “leak” out of these communities due to a lack of nearby supermarkets.

The real upside of this research project is that all of the results are viewable online, through TRF’s PolicyMap service. So local economic development officials, neighborhood-based organizations, retailers, and others can examine the location and characteristics of low-supermarket-access areas in their own communities. On Capitol Hill, the analysis suggests that we’re pretty well served. Lots of car owners, and it’s really not that far to the store. Cross the Anacostia River, however, and it’s another story altogether. Pinpointing and describing the untapped opportunities for supermarket development is hopefully a first step toward reducing market obstacles to higher-quality, lower-cost food options for residents of communities like Ward 7 and Ward 8 nationwide.

The Brookings Metropolitan Policy Program and The Reinvestment Fund (TRF) performed a detailed analysis of supermarket access in 10 metropolitan areas, and the results are discussed in a new video, “Getting to Market."

Results from the analysis encourage users to view the locations of, and generate reports about, low-supermarket-access communities within the 10 metropolitan areas. This is highly useful data for those working at the national and local levels to tackle the problem of inadequate access through public policy and private investment. You can also access these data alongside any of PolicyMap’s 10,000 data indicators and full functionality at www.policymap.com

For those interested in other metropolitan areas, TRF has made available a nationwide analysis of low-supermarket-access communities at www.trfund.com.

Media Memo »


Profiles of 10 Metropolitan Areas (PDFs)

Video

• Supermarket Access in Metro Areas

In the United States, the official poverty rate for 2012 stood at 15 percent based on the national poverty line which is equivalent to around $16 per person per day. Of the 46.5 million Americans living in poverty, 20.4 million live under half the poverty line. This begs the question of just how poor America’s poorest people are.

Poverty, in one form or other, exists in every country. But the most acute, absolute manifestations of poverty are assumed to be limited to the developing world. This is reflected in the fact that rich countries tend to set higher poverty lines than poor countries, and that global poverty estimates have traditionally excluded industrialized countries and their populations altogether.

An important study on U.S. poverty by Luke Shaefer and Kathryn Edin gently challenges this assumption. Using an alternative dataset from the one employed for the official U.S. poverty measure, Shaefer and Edin show that millions of Americans live on less than $2 a day—a threshold commonly used to measure poverty in the developing world. Depending on the exact definitions used, they find that up to 5 percent of American households with children are shown to fall under this parsimonious poverty line.

Methodologies for measuring poverty differ wildly both within and across countries, so comparisons and their interpretation demand extreme care.

These numbers are intended to shock—and they succeed. The United States is known for having higher inequality and a less generous social safety net than many affluent countries in Europe, but the acute deprivations that flow from this are less understood. A crude comparison of Shaefer and Edin’s estimates with the World Bank’s official $2 a day poverty estimates for developing economies would place the United States level with or behind a large set of countries, including Russia (0.1 percent), the West Bank and Gaza (0.3 percent), Jordan (1.6 percent), Albania (1.7 percent), urban Argentina (1.9 percent), urban China (3.5 percent), and Thailand (4.1 percent). Many of these countries are recipients of American foreign aid. However, methodologies for measuring poverty differ wildly both within and across countries, so such comparisons and their interpretation demand extreme care.

This brief is organized into two parts. In the first part, we examine the welfare of America’s poorest people using a variety of different data sources and definitions. These generate estimates of the number of Americans living under $2 a day that range from 12 million all the way down to zero. This wide spectrum reflects not only a lack of agreement on how poverty can most reliably be measured, but the particular ways in which poverty is, and isn’t, manifested in the U.S.. In the second part, we reexamine America’s $2 a day poverty in the context of global poverty. We begin by identifying the source and definition of poverty that most faithfully replicates the World Bank’s official poverty measure for the developing world to allow a fairer comparison between the U.S. and developing nations. We then compare the characteristics of poverty in the U.S. and the developing world to provide a more complete picture of the nature of poverty in these different settings. Finally, we explain why comparisons of poverty in the U.S. and the developing world, despite their limitations and pitfalls, are likely to become more common.

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At a legislative conference in Cambridge, Ohio, Bruce Katz stressed the importance of cities and metro areas to the state's overall prosperity. Acknowledging the decline of Ohio's older industrial cities, Katz noted the area's many assets and argued for a focus on innovation, human capital, infrastructure, and quality communities as means to revitalize the region. 

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Should increasing exports be part of the solution to Greater Cleveland's -- and the nation's -- economic doldrums? Can export growth make this recovery job-filled rather than jobless?

That's a counterintuitive proposition, but one that is gaining traction in Northeast Ohio. Cleveland, Youngstown and other metros often see themselves on the losing end of globalization, as manufacturing has moved abroad and trade barriers and currency manipulations impede the entry of U.S.-made goods into foreign markets.

But exports bring tremendous benefits to workers, companies and the nation as a whole. Exporting companies tend to be more innovative. They pay higher wages across all skill levels. And they are a response to a new global reality: 95 percent of the world's customers live outside the United States.

Any successful export strategy, including the one that the Obama administration is developing, must start with where U.S. exports come from. Our major metropolitan areas are the nation's export hubs. In 2008, they produced about 64 percent of U.S. exports, including more than 62 percent of manufactured goods and 75 percent of services.

Northeast Ohio's major metros are leaders in exports, oriented toward global consumers in a way that most American regions are not. Exports contribute more than 12 percent of the gross metropolitan product in Akron, 13 percent in Cleveland, and a jaw-dropping 18 percent in Youngstown, compared to a national metro average of 10.9 percent.

Exports are also a source of much-needed jobs in these metros. As of 2008 (the most recent year for which we have data) there were 110,000 export jobs in the Cleveland metro and about 30,000 each in greater Akron and Youngstown. Every $1 billion in exports from the average metropolitan area in 2008 supported 5,800 jobs.

To leverage the powerful export activity already occurring in Cleveland and elsewhere, the Obama administration should connect its macroeconomic vision for export growth with the metro reality where the doubling will mostly occur.

For example, the president's export advisory council should include state and local leaders, and revamp export guidance and support to meet the needs of small firms, which find it hard to enter new markets.

But Northeast Ohio metros have their own work to do. The rate of export growth between 2003 and 2008 in Cleveland and Akron is lackluster when compared to the large metro average. U.S. companies dominate the global market in service exports, and the nation actually has a generous service trade surplus, but service exports' share of overall output in Northeast Ohio metros is smaller than the large metro average, and growth in service exports is slower.

Most troubling, Cleveland and its neighbors are underperforming when it comes to innovation, which is a critical ingredient for future international success. Metros that are manufacturing-oriented or export-intensive (or both) tend to create patents at a rate of just over five patents per 1,000 workers. But Cleveland, Akron and Youngstown fall short, with 2.8, 4.5, and 1 patent per 1,000 workers, respectively.

Northeast Ohio must accelerate its efforts to increase the region's innovation and export capacity, through regional organizations such as NorTech and JumpStart. Just as the president set an export goal for the nation, Northeast Ohio should embrace the opportunity to set its own aggressive export goals. Business groups, the Fund for Our Economic Future, universities and regional economic development organizations have made a start but need to devote more resources and collaborate to achieve those goals.

The region can make this happen. Organizations like the Manufacturing and Advocacy and Growth Network (MAGNET) and its partners, with support from the Fund and chambers, are working directly with companies to increase manufacturing innovation in Northeast Ohio, with increasing exports one of their major emphases.

Updated, 11/14/14 with new content.

President Obama is traveling this week in the Asia-Pacific region. He is attending the APEC Summit in Beijing Monday and Tuesday; the ASEAN Summit and the East Asia Summit in Myanmar Tuesday; and the G-20 Summit in Brisbane Saturday and Sunday. Brookings experts have offered significant commentary on the president's agenda and challenges during this trip:

Richard Bush, director of the Center for East Asia Policy Studies and the Michael H. Armacost Chair, reflects on what Presidents Obama and Xi said about the situation in Hong Kong during their summit.

Charles Freeman, a nonresident senior fellow in the John L. Thornton China Center, reflects on Chinese President Xi's address to business executives during APEC during which Xi discussed the "new normal" of Chinese economic growth and more open visa policies. His remarks, Freeman notes, "sounded a contrasting note to those he made just a month earlier" and "were also out of tune with the well-chronicled anxieties of foreign investors about the souring business environment they face in China."

Neil Ruiz, a senior policy analyst and associate fellow in the Metropolitan Policy Program, says that the new visa rules agreed to by Presidents Obama and Xi "is an important step in building economic bridges between Chinese cities and U.S. metropolitan areas."

Senior Fellow Michael O'Hanlon, the Sydney Stein, Jr. Chair in International Security, focuses on two prospective agreements on military matters, dealing with confidence-building and operational safety issues, reached between the U.S. and China. "The Obama and Xi teams should be proud of a good summit," writes O'Hanlon, "But situating these accords in a broader framework underscores how much work remains to be done."

On the U.S.-China climate agreement to cut greenhouse gas emissions: Brookings Managing Director William Antholis calls it "dramatic" for both diplomatic and domestic political reasons; and Fellow Tim Boersma, acting director of the Energy Security Initiative, says it is "a big deal."

Miriam Sapiro, a visiting fellow and former deputy U.S. trade representative, says that the trip "gives the White House the chance to emphasize foreign and economic policy goals that can be broadly embraced by Democrats and Republicans." Sapiro also commented on the importance of trade policy, including the Trans-Pacific Partnership, in a recent Brookings Cafeteria podcast.

Experts recently joined together in a full-day conference to examine the economic, environmental, political, and security implications of President Obama's trip to China and his interactions with President Xi Jinping. Full audio, video, and a transcript of remarks by former U.S. National Security Advisor Thomas Donilon are available.

Six experts from the John L. Thornton China Center recently offered their views on how President Obama can have a productive visit with President Xi. Their comments covered issues including Hong Kong, trade, and domestic Chinese reforms, among others.

Lynn Kuok, a nonresident fellow with the Center for East Asia Policy Studies, offers her perspectives on Obama's trip to Myanmar. 

In Think Tank 20, experts from Brookings and around the world address interrelated debates about growth, convergence, and income distribution—three elements likely to shape policy debates beyond the G-20 Summit. Use the handy globe interactive to navigate to countries and regions.

Kemal Derviş—vice president and director of Global Economy and Development and the Edward M. Bernstein Scholar—and Peter Drysdale—emeritus professor of economics at Australian National University—are the editors of a new volume on the G-20 summit at five years. They explore questions including, Will these summits add ongoing value to global economic governance, or will they will become purely ceremonial gatherings, which continue to take place because of the inertia in such processes?

Choosing a health plan on one of the new public or private exchanges is no easy task. That’s especially true for those with medical conditions who want to be very sure the plan they enroll in will provide the services they need.

This challenge is not unique to buying health plans, however. It’s always hard for consumers to buy complex and technical services or products when they have little or no expertise in the field. Health insurance can be especially daunting, with so many factors to consider, and even the terminology can be confusing.

Standardizing choices and terms can be helpful to a point. Grouping health plans according to premiums and out-of-pocket costs – bronze, silver, gold and platinum plans – has worked well in the public exchanges. But standardization will always be in tension with innovation, and the reality is that most exchanges will carry a larger inventory of plans than what the typical consumer wants to scroll through. So the question of “choice architecture” – how the plans are filtered or screened – will come to the fore. 

Consumers will have many questions.  What is the price? How do I assess the trade-off between lower premiums and higher cost sharing? Is my doctor in the plan’s network? Are the drugs I take in the formulary (whatever that is)? Things can get real complicated real fast, and it can feel like there are too many, not too few, choices. No wonder some call that “choice anxiety”.

But that view overlooks how technology is likely to reduce choice anxiety in health care, just as it has for other complicated searches.  It used to take a librarian to find an obscure article or a travel agent to plan a vacation. Today a few keystrokes on Google locates the article, and Travelocity makes vacation planning a cakewalk, with everything from on-time flight arrival data to pictures of hotel rooms and customer reviews arranged by star ratings.

Expect technology to have the same dramatic impact on buying health coverage in the near future. There are several reasons for this:

The presentation of consumer information will get better. When large new markets for products and services are created and the demand for buyers’ information rises sharply, the incentive for entrepreneurs – both for-profit and nonprofit – to provide customer-friendly information also rises. We’ve already seen this in parts of the health care market where there has been plenty of choice. Millions of federal employees have for many years been able choose among a wide range of plans with differing benefits.  Many have turned to the highly regarded Consumers’ Checkbook to help them understand and readily compare plans in the federal program.

Checkbook has launched a similar comparison tool for the  Illinois exchange and recently won the Robert Wood Johnson Foundation’s (RWJF) first "Plan Choice Challenge," a nationwide competition to design a technology application that helps people choose their best health plan options.

Navigation technology will make searches simple and quick.  Most consumers don’t want to spend a lot of time comparing plans; they want to find the best buy for their situation as quickly as possible.  That’s why brokers have traditionally encouraged employers to offer their employees a carefully limited set of shopping choices, but we expect plan navigation technology to constantly improve the shopping experience in ways that will help customers search a larger inventory and still make choices more easily.   Stride Health, a San Francisco startup and finalist in the RWJF Challenge, has developed a recommendation technology that searches massive data sets on networks and formularies in seconds to help consumers find a “match” that fits their budget and health care needs.  (Full disclosure – author Joel Ario is an investor).  

Stride is one of more than 40 “web brokers” that has met federal consumer protection and privacy standards enabling it to work with the federal exchange to enroll subsidy-eligible individuals in coverage.  Expect increasing collaboration between public exchanges and private vendors, with a surge of apps and gadgets to make navigation easier and easier in health exchanges.

Technology will allow choices to be tailored to medical history.  Advances in technology won’t just make it technically easier to pick and choose by price and reputation. These advances will also empower Americans to base their choices on their likely medical needs. Today, tailoring your coverage to your medical condition usually means trying to get a doctor– or several doctors– to help you figure out what you should look for in a plan. Even with that help, for the average person it’s still a hit-or-miss proposition. But new forms of choice technology are beginning to utilize questions about medical history to guide buyers towards the plans that are most suited to their condition.  

Checkbook and Stride already allow consumers to enter more detailed health histories and get more sophisticated assistance, and this will only improve as exchanges publish more data in machine readable formats.   Expect more and increasingly sophisticated customized navigators, especially as patients get more access to their electronic medical records.  Also expect sellers to respond with products than bundle services to meet the new demand.

Does this mean that an iPhone app will be all that’s needed to ensure that every consumer can find his or her perfect plan? Not quite.  Health insurance marketplaces will continue to present thorny regulatory challenges.  Insurance regulators will need to guard against unfair practices, such as insurers’ designing benefit plans to drive away applicants with certain health conditions; privacy concerns will be raised whenever apps ask for medical history; and new forms of provider integration will test antitrust doctrine.

But one thing is clear. Improving technology will soon make picking the right health plan a far more precise and simple process – easy enough for many of our children to do on their smart phones or whatever gadget comes next.

There is a lot of hope around the potential of Big Data—massive volumes of data (such as cell phone GPS signals, social media posts, online digital pictures and videos, and transaction records of online purchases) that are large and difficult to process with traditional database and software techniques—to help achieve the sustainable development goals. The United Nations even calls for using the ongoing Data Revolution –the explosion in quantity and diversity of Big Data—to make more and better data usable to inform development analysis, monitoring and policymaking: In fact, the United Nations believes that that “Data are the lifeblood of decision-making and the raw material for accountability. Without high-quality data providing the right information on the right things at the right time; designing, monitoring and evaluating effective policies becomes almost impossible.” The U.N. even held a “Data Innovation for Policy Makers” conference in Jakarta, Indonesia in November 2014 to promote use of Big Data in solving development challenges.

Big Data has already played a role in development: Early uses of it include the detection of influenza epidemics using search engine query data or the estimation of a country’s GDP by using satellite data on night lights. Work is also under way by the World Bank to use Big Data for transport planning in Brazil.

During the Data for Development session at the recent NetMob conference at MIT, we presented a paper in which we jump on the Big Data bandwagon. In the paper, we use mobile phone data to assess how the opening of a new toll highway in Dakar, Senegal is changing how people commute to work (human mobility) in this metropolitan area. The new toll road is one of the largest investments by the government of Senegal and expectations for its developmental impact are high. In particular, the new infrastructure is expected to increase the flow of goods and people into and out of Dakar, spur urban and rural development outside congested areas, and boost land valuation outside Dakar. Our study is a first step in helping policymakers and other stakeholders benchmark the impact of the toll road against many of these objectives.

Assessing how the impact of the new toll highway differs by area and how it changes over time can help policymakers benchmark the performance of their investment and better plan the development of urban areas.

The Dakar Diamniadio Toll Highway (in red in Figure 1), inaugurated on August 1, 2013 is the first section (32 km or 20 miles) of a broader project to connect the capital, Dakar, through a double three-lane highway to a new airport (Aeroport International Blaise Diagne, AIBD) and a special economic zone, the Dakar Integrated Special Economic Zone (DISEZ) and the rest of the country.

Note: The numbers indicate the incidence of increased inter cell mobility and were used to calculate the percentage increase in mobility.

The cost of this large project is estimated to be about $696 million (FCFA 380.2 billion or 22.7 percent of 2014 fiscal revenues, excluding grants) with the government of Senegal having already disbursed $353 million. The project is one of the first toll roads in sub-Saharan Africa (excluding South Africa) structured as a public-private partnership (PPP) and includes multilateral partners such as the World Bank, the French Development Agency, and the African Development Bank.

In our study, we ask whether the new toll road led to an increase in human mobility and, if so, whether particular geographical areas experienced higher or lower mobility relative to others following its opening.

Using mobile phone usage data (Big Data), we use statistical analysis in our paper to approximate where people live and where they work. We then estimate how the reduction in travel time following the opening of the toll road changes the way they commute to work.

As illustrated in the map of Figure 1, we find some interesting trends:

• Human mobility in the metropolitan Dakar area increased on average by 1.34 percent after the opening of the Dakar Diamniadio Toll Highway. However, this increase masks important disparities across the different sub-areas of the Dakar metropolitan areas. Areas in blue in Figure 1 are those for which mobility increased after the opening of the new road toll while those in red experienced decreased mobility.
• In particular, the Parcelles Assainies suburban area benefited the most from the toll road with an increase in mobility of 26 percent. The Centre Ville (downtown) area experienced a decrease in mobility of about 20 percent.

These trends are important and would have been difficult to discover without Big Data. Now, though, researchers need to parse through the various reasons these trends might have occurred. For instance, the Parcelles Assainies area may have benefited the most because of its closer location to the toll road whereas the feeder roads in the downtown area may not have been able to absorb the increase in traffic from the toll road. Or people may have moved from the downtown area to less expensive areas in the suburbs now that the new toll road makes commuting faster.

From these preliminary results (our study is work in progress, and we will be improving its methodology), we are encouraged by the fact that our method and use of Big Data has three areas of application for a project such as this:

Benchmarking: Our method can be used to track how the impact of the Dakar Diamniadio Toll Highway changes over time and for different areas of the Dakar metropolitan areas. This process could be used to study other highways in the future and inform highway development overall.

Zooming in: Our analysis is a first step towards a more granular study of the different geographic areas within the Dakar suburban metropolitan area, and perhaps inspire similar studies around the continent. In particular, it would be useful to study the socio-economic context within each area to better appreciate the impact of new infrastructure on people’s lives. For instance, in order to move from estimates of human mobility (traffic) to measures of “accessibility,” it will be useful to complement the current analysis with an analysis of land use, a study of job accessibility, and other labor markets information for specific areas. Regarding accessibility, questions of interest include: Who lives in the areas most/least affected? What kind of jobs do they have access to? What type of infrastructure do they have access to? What is their income level? Answers to these questions can be obtained using satellite information for land prices, survey data (including through mobile phones) and data available from the authorities. Regarding urban planning, questions include: Is the toll diverting the traffic to other areas? What happens in those areas? Do they have the appropriate infrastructure to absorb the increase in traffic?

Zooming out: So far, our analysis is focused on the Dakar metropolitan area, and it would be useful to assess the impact of new infrastructure on mobility between the rest of the country and Dakar. For instance, the analysis can help assess whether the benefits of the toll road spill over to the rest of the country and even differentiate the impact of the toll road on the different regions of the country.

This experience tells us that there are major opportunities in converting Big Data into actionable information, but the impact of Big Data still remains limited. In our case, the use of mobile phone data helped generate timely and relatively inexpensive information on the impact of a large transport infrastructure on human mobility. On the other hand, it is clear that more analysis using socioeconomic data is needed to get to concrete and impactful policy actions. Thus, we think that making such information available to all stakeholders has the potential not only to guide policy action but also to spur it. 

References

Atkin, D. and D. Donaldson (2014). Who ’ s Getting Globalized ? The Size and Implications of Intranational Trade Costs . (February).

Clark, X., D. Dollar, and A. Micco (2004). Port efficiency, maritime transport costs, and bilateral trade. Journal of Development Economics 75(2), 417–450, December.

Donaldson, D. (2013). Railroads of the Raj: Estimating the Impact of Transportation Infrastructure. forthcoming, American Economic Review.

Fetzer Thiemo (2014) “Urban Road Construction and Human Commuting: Evidence from Dakar, Senegal.” Mimeo

Ji, Y. (2011). Understanding Human Mobility Patterns Through Mobile Phone Records : A cross-cultural Study.

Simini, F., M. C. Gonzalez, A. Maritan, and A.-L. Barab´asi (2012). A universal model for mobility and migration patterns. Nature 484(7392), 96–100, April.

Tinbergen, J. (1962). Shaping the World Economy; Suggestions for an International Economic Policy.

Yuan, Y. and M. Raubal (2013). Extracting dynamic urban mobility patterns from mobile phone data.

Electronic money, or e-money, emerged in the countries of the West African Economic and Monetary Union (WAEMU) following the adoption, in 2006, of a Central Bank Instruction establishing a flexible regulatory framework aimed at encouraging e-money business. The activity expanded in 2009 with the involvement of telecommunications operators in the provision of mobile telephone-based financial services, which increased the number of users and the volume of transactions.

A growing business

At the end of September 2015, 22 million people, or nearly a quarter of the people in the union, subscribed to financial services via mobile phone. Approximately 30 percent of those subscribers carried out at least one transaction per 90-day period.

Some 500 million transactions took place over the first nine months of 2015. The cumulative value of the transactions was 5 trillion CFA francs ($8.5 billion) by the end of September 2015, a growth of 142 percent from September 2014. Between September 2013 and September 2014, this value grew from CFA 1 trillion to CFA 2.068 trillion, an increase of 107 percent.

The mobile phone financial services distribution network followed a similar upward trend, rising from 93,621 points of services in 2014 to more than 132,658 at the end of September 2015.

Figure 1. Trends in the value of transactions

The socioeconomic environment in the union goes a long way to explaining the success of mobile telephone payment services. Indeed, this method of providing money transfer or payment services is particularly well suited to people who lack access to the mainstream banking system, and also affords non-bank institutions the opportunity to offer users non-cash money against cash deposits, which can then be used for a variety of financial transactions.

The growing involvement of telecommunications operators

The market is increasingly dominated by partnerships between banks and telecommunications operators, which represented 25 of the 33 licensed or authorized e-money issuers at the end of December 2015. In the framework of this model, known as the bank model, the bank has responsibility for issuing the e-money.

The other seven non-bank institutions, under the non-bank model, are authorized to issue electronic money as “Electronic Money Institutions” (EMIs) [1].

In WAEMU, e-money issuers are supported by a regulatory framework that was revised in 2015 to ensure increased security and quality of payment services backed by electronic money.

Figure 2. E-money issuers in WAEMU

Note: DFS denotes microfinance institutions.

A revised regulatory framework

With the expansion of mobile phone financial services and the growing involvement of telecommunications operators, the Central Bank has revised its regulatory framework with the aim of enhancing the security and quality of payment services backed by electronic money. The most salient improvements must focus on:

• Increasing issuer accountability by clarifying users’ roles in partnerships with technical service providers. With this goal in mind, the activities of technical service providers have been restricted to technical processing or the distribution of e-money under the responsibility of the issuer. In addition, issuers are responsible for the integrity, reliability, security, confidentiality, and traceability of all transactions carried out by all of their distributors; Stimulating competition through transparent pricing with an obligation for issuers to publish their rates;


• Specific requirements in terms of governance and internal and external audits for electronic money institutions, standards of integrity on the part of the management, professional secrecy and regular infrastructure audits;


• Increased protection for bearers of electronic money, including keeping funds in dedicated accounts, requiring a constant equivalence between the amount of e-money and the balances in the dedicated accounts, and mandatory creation of a mechanism to take in and deal with complaints by bearers of electronic money;


• Reinforcement of the supervisory mechanism by reducing deadlines for reporting on issuers’ activities to the Central Bank and adopting sanctions for violations of regulatory provisions.

Provision of mobile-phone-based financial services

Mobile-phone-based financial services provided in WAEMU include three categories of services, namely services involving the use of cash (banknotes and coins), e-money services, and so-called “second generation” services.

The first type of service essentially involves deposits of cash or refilling of electronic wallets, as well as withdrawals. This type of service represents 24 percent of user transactions. Cash deposits predominate; they allow customers to provision their electronic money accounts.

Seventy-six percent of the funds deposited into e-money accounts are used, above all, for purchases of telephone credit, payment of bills, person-to-person money transfers, and money transfers from individuals to businesses and from individuals to government agencies. The main payment services found in WAEMU pertain to payment of water or electricity bills, payment of satellite television subscriptions, and purchases of goods in supermarkets or fuel at service stations.

Payments of taxes or income taxes to government agencies and payments of micro-loan installments are also made through mobile phone financial services, but are much less common.

So-called “second generation” services, namely micro-insurance, micro-savings, and micro-credit, are currently emerging in WAEMU. Their development could be an opportunity to provide access to the banking system for the users of the services.

Finally, interoperability is just beginning to be implemented based on bilateral agreements between stakeholders, particularly with a view to offering cross-border payment services between member states of the union.

Challenges

A review of the development of mobile phone financial services in WAEMU reveals some obstacles to the rapid development of this type of financial service within WAEMU. They include:

• a low number of active users, due to the high cost of the services;
• the fact that the services are not well known due to inadequate financial education;
• the low rate of digitization of government agencies’ payment systems; and
• insufficient partnerships between bank and non-bank issuers with a view to developing a more inclusive range of “second-generation” services.

In collaboration with all stakeholders, the Central Bank has developed a financial inclusion strategy to continuously improve, access to and use of diverse, tailored and affordable financial services. The implementation of these actions as described in the Central Bank of West African States (BCEAO) financial inclusion strategy should support the challenges mentioned above.

Read in French »

[1] EMI: any legal entity, other than a bank, financial payment institution, or decentralized financial system, that is authorized to issue payment instruments in the form of electronic money and whose business activities are restricted to electronic money issuing and distribution.

Today, the Center on the United States and Europe (CUSE) at Brookings hosted Georgian Defense Minister Irakli Alasania for an address on Georgia's vision for Euro-Atlantic integration during a period of increased insecurity in the region. In his remarks, Minister Alasania shared his insights on the upcoming NATO summit and Georgia's approach to enhancing its relations with the West while attempting to normalize relations with Russia to lower tensions still simmering from the war six years ago.

Minister Alasania said that his country's "path toward NATO and European integration is unchanged" and offered next steps on "how we're going to make sure that the credibility of the west, the credibility of NATO as an organization will continue to be relevant to safeguard the values that we all cherish: freedom, democracy, and a Europe whole and free."

"We are acting like a NATO country," he said. Continuing:

We are acting like a European country, because we believe that our future is within Europe. And we regard ourselves as a future member. And this is why we are preparing ourselves institution-wise, in terms of freedom, in terms of democracy, and the military capabilities when ... the historical opportunity will open up to Georgia to join NATO and the EU.

The defense minister added that "We are looking at the future." We:

cannot be dragged back to the confrontation of the early 1990s. And we want to make sure that our policies, our economic policies, our foreign policy, [are] specifically working to make sure that the Georgian people who elected us are now moving closer and closer to the European way of living standards. And this only can be done if the efforts that Georgia is making will be validated, will be appreciated by the NATO and the European countries.

One of the things we are looking forward to is the signing of the association agreement. The next step obviously is the NATO summit. And what the NATO summit will decide is how effectively they can assure the allies, but also the partners, like Georgia.

On Russia, Minister Alasania spoke in both hopeful and realistic terms, saying that:

We are now approaching foreign policy and specifically the issue with Russia with a rather mature approach. We don't have any illusions that Russia will change its behavior or policies toward Georgia's territorial integrity or NATO aspirations. But we do hope the diffusion of tensions, the decrease of the military rhetoric between the two countries, will serve Georgia's interests best.

And it will give us more space to develop ourselves, to develop our relationship with the Abkhazia and South Ossetian areas. This is the cornerstone of our policy actually. Be uncompromising on the territorial integrity. Be uncompromising on NATO aspiration, membership in NATO and the EU. But at the same time be sure that we are not going give a pretext to anybody in the region, specifically to Russians, to attack us politically or otherwise.

Listen to audio of the event below or on the event's web page to get the full conversation, which was moderated by CUSE Director Fiona Hill.

Audio

• Georgia's Euro-Atlantic Aspirations and Regional Security

Editor's Note: As part of the 2014 Midterm Elections Series, Brookings scholars and outside experts will weigh in on issues that are central to this year's campaigns, how the candidates are engaging those topics, and what will shape policy for the next two years.

Since the Citizens United decision, political spending by outside groups has been shaping voters’ opinions before Election Day and public policy afterwards.  Spending patterns that began after the 2010 decision will continue during the upcoming midterms: nonparty, outside spending will flow through two distinct pipelines—super PACs and politically active nonprofits. This time around there seems to be a partisan split to the spending, with Democrats leaning towards super PACs and Republicans relying more on dark money nonprofits. But whichever tool is used to funnel money into competitive races, imperfect or non-existent disclosure rules leave voters unable to determine whether access and influence is being sold to highest bidder.

Shining a brighter light on super PAC and nonprofit campaign spending would not cleanse the system of all of its corrupting influences, but it would help to restore citizens’ trust in government by eliminating the secrecy that makes voters believe their elected officials have something to hide. More disclosure would also result in the equally important outcome of demonstrating that government trusts us, its citizens, with information about how the influence industry works.   

When Thomas Jefferson wrote, “Whenever the people are well-informed, they can be trusted with their own government...whenever things get so far wrong as to attract their notice, they may be relied on to set them to rights,” he certainly could not have conceived of secret money’s impact on elections and policy-making. But every year that goes by with Congress failing to address secret campaign spending challenges the founding father’s time-tested wisdom.

When the Supreme Court decided Citizens United, it was either willfully blind or sorely naïve about the state of political finance disclosure. Justice Kennedy swept aside concerns about the corrupting influence of unlimited political spending by claiming that, “With the advent of the Internet, prompt disclosure of expenditures can provide shareholders and citizens with the information needed to hold corporations and elected officials accountable for their positions. . . This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.”

Unfortunately, no such prompt disclosure existed at the time, nor has Congress been able to pass any improvements to the transparency regime since then. In the case of super PACs, while information about donors must eventually be disclosed to the Federal Election Commission (FEC), disclosures can be delayed by up to three months.  This is not an inconsequential delay, especially when contributions come are in the multi-million dollar range.

There is even less disclosure by politically active nonprofits.  Their overall expenditures are only disclosed after the election in annual reports filed with the Internal Revenue Service (IRS). The donors to dark money groups may never be known, as the law does not require the names of donors to such groups to be disclosed. Yet more than 55 percent of advertising has been paid for by dark money groups, and 80 percent advertising benefitting Republican candidates has been paid for with undisclosed funds according to the New York Times. 

Congress and the executive branch have no shortage of methods to make money in politics more transparent, but have so far failed to demonstrate they respect voters enough to entrust us with that information.  The Real Time Transparency Act (S. 2207, H.R. 4442) would ensure that contributions of $1000 or more to candidates, parties and PACs, including super PACs, are disclosed within 48 hours. It would also require electronic filing of campaign finance reports.  The DISCLOSE Act, S. 2516, would disclose contributors to political nonprofits entrusting voters with information that currently is only known to the candidates who may benefit from dark money contributions. 

Affirmative congressional action would be the strongest signal that government trusts its citizens, but executive branch agencies can also take important steps to make political finance information more transparent. The IRS is in the process of reforming rules to better clarify when a nonprofit is a political organization and thus must disclose its donors.  The Securities and Exchange Commission can likewise modify its rules to require publicly traded companies to disclose their political activities.

Many large donors have gone to great lengths to take their political activities underground, claiming they fear attacks in the form of criticism or boycotts of their companies.  But just as participating in the political process through contributing to election efforts is an expression of free speech, so is criticizing such efforts.  Yet until campaign finance information is fully and quickly made public, the first amendment rights of voters and their ability to participate fully in our democracy are drastically shortchanged.

Ryan’s EITC is pro-mobility… but funding it may not be

Paul Ryan seems to be thinking seriously about the issues of poverty and social mobility. He is a reformer as well as an authentic conservative.

While his willingness to embrace EITC expansion is welcome, his proposed funding methods raise serious questions. Paying for anti-poverty programs by cutting anti-poverty programs runs the risk of being self-defeating. No doubt some of them are not working as intended. But reform is the answer, rather than abolition. Many of these programs help those in the deepest poverty - who in many cases are those least likely to benefit from welfare-to-work policies such as the EITC, according to recent research from the Center for Budget and Policy Priorities and from the National Poverty Center. 

Ryan's package is worthy of serious attention, not least from the perspective of social mobility. It is important, however, not to consider the impact of the EITC expansion alone, but also how - and by whom- it will be paid for. 

In new Urban-Brookings Tax Policy Center analysis of Earned Income Tax Credit (EITC) take-up at the county level, Benjamin Harris, a fellow in Economic Studies, and Research Assistant Lucie Parker use zip-code level data on taxes and demographics to take a "fresh look" at the EITC. "Since its creation in 1975," they write, "the Earned Income Tax Credit has played a major role in the U.S. safety net." Earlier this year, Harris presented EITC take-up using IRS data from 2007. Compare that to the new list of ten counties with the highest share of EITC recipients below:

"The regional variation EITC claiming is stark," Harris and Parker conclude. "The counties with the highest share of taxpayers claiming the EITC are overwhelming located in the Southeast. ... [O]ver half the taxpayers in a large share of counties in Alabama, Georgia, and Mississippi claim the EITC. With few exceptions, almost all counties with high EITC claiming are located in the South. Relative to the South, the Northeast and the Midwest have much lower claiming rates. Moreover, average EITC benefit closely follows the pattern for share of taxpayers taking up the credit: in counties where more taxpayers claim the credit, the credit is larger on the whole."

Visit this U.S. map interactive to get county level data on share of taxpayers claiming EITC as well as average EITC amount, in dollars, per county.

Executive Summary

The Millennium Challenge Corporation (MCC) is one of the outstanding innovations of the eight-year presidency of George W. Bush. No other aid agency—foreign or domestic—can match its purposeful mandate, its operational flexibility and its potential muscle.

In the first year after it became operational in May 2004, however, the MCC made a number of mistakes from which it has not fully recovered. It also had the bad luck of facing an increasingly tight budget environment as its performance improved.

The MCC may not survive as an independent agency. Critics have advocated closing it down, while many supporters of foreign assistance reform would maintain the MCC program but consolidate it with the Agency for International Development and the President’s Emergency Plan for Aids Relief under a single individual with broad development responsibilities.

In our assessment, one of the singular achievements of this innovation is the “MCC effect”: steps taken by a number of countries to improve their performance against the MCC’s objective indicators in order to become eligible for an MCC compact.

A Rough Start

The Millennium Challenge Corporation started off in the wrong direction in 2004. New leadership a year later put the MCC back on track. Unfortunately, however, the MCC has not been able to recover quickly enough from its early mistakes to compete successfully for funding in the face of increasingly severe government-wide budget constraints. After more than four years of operation, it has not yet achieved “proof of concept.” As a result, its future as an independent agency is in jeopardy.

The Concept

In March 2002, six months after the 9/11 terrorist attacks, President George W. Bush announced a commitment to increase U.S. aid to low-income countries by $5 billion per year, representing a jump of 50 percent from the baseline level of official development assistance (ODA).

More remarkable than the size of the commitment was the nature of the commitment. It would not be more of the same. It would be better. It would reward good performance by focusing exclusively on poor countries implementing sound economic development and poverty reduction strategies, as reflected in objective indicators. It would achieve measurable results.

President Bush’s initial concept did not specify the organizational form of the new program. Instead of putting it under the State Department or Agency for International Development (USAID), President Bush opted for creating a special-purpose government corporation—the Millennium Challenge Corporation—to run the program.

Conception turned out to be the easy part. It took almost a year for the administration to send legislation proposing the MCC to Congress, and it took another year for the Congress to send authorizing legislation to the president.

While the purity of the MCC concept was compromised significantly in the process of obtaining enough votes in Congress to establish it, six key elements were preserved: rewarding good performance; country ownership; measurable results; operational efficiency; sufficient scale at the country level to be “transformational”; and global commitments at the rate of $5 billion per year.

The Record

Perhaps the biggest mistake in the MCC’s first year of operations was a failure to develop a good working relationship with the U.S. Congress. Some staffing choices gave the impression that the MCC had no interest in the experience and expertise that existed in USAID, the multilateral development banks and NGOs working in low-income countries. In retrospect, a third problem may have been starting compact negotiations with more than a dozen countries instead of building its portfolio of compact countries more slowly and carefully.

Paul Applegarth resigned as CEO in June 2005 and John Danilovich took over the following October. At that point, compacts had been signed with five countries. Funding problems were already visible. Against the original proposal seeking a combined $4.6 billion for the first two start-up years (reaching the target $5 billion in FY 2006), the budget request added up to only $3.8 billion, Congress authorized only $3.6 billion, and appropriations only reached $2.5 billion.

For the next three years, FY 2006 – FY 2008, the administration’s budget request for the MCC was straight-lined at $3 billion. Appropriations peaked in FY 2006 at $1.77 billion, and then slipped to $1.75 billion in FY 2007 and $1.482 billion in FY 2008 (after an across-the-board rescission). Thirteen more compacts were signed, bringing the total number of compact countries to 18. In addition, threshold agreements totaling $361 million were being implemented in 14 countries. At the end of FY 2008, cumulative MCC appropriations were $7.5 billion, and cumulative compact commitments were $6.3 billion.

As the Bush administration winds down and the Obama administration gears up, the MCC is in an awkward situation. It has recovered from its start-up problems and now has significant support in Congress and the development community. The evidence of an “MCC effect” is particularly notable. The compact countries are fans of the program, and other potentially eligible countries appear eager to conclude compacts.

However, the “measurable results” promised to an impatient Congress have not yet materialized. Since the first compact will not reach the end of its original four year lifespan until July 2009, it is too early to expect such results. Still, enough questions about the effectiveness of the MCC have been raised to strengthen the position of skeptics in the Congress.

A moment of truth is approaching. Assuming FY 2009 funding remains capped by continuing resolutions at a level no higher than $1.5 billion, the MCC will not be able to conclude more than three compacts averaging $400 million each during this fiscal year. While a strong case can be made for an independent aid agency operating at the rate of $5 billion per year, a rate of $1-$1.5 billion per year for a stand-alone agency is not so easy to justify. Meanwhile, an important coalition of foreign aid advocates sees the change of administration as an opportunity to consolidate a wide range of development and humanitarian assistance programs, including the MCC, into a single agency or cabinet-level department.

Findings and Recommendations

Our assessment of the MCC at the end of FY 2008 focuses on six operational issues and ends with a recommendation to the Obama administration. (The full assessment is in our working paper “The Millennium Challenge Corporation: An Opportunity for the Next President.”)

1. Objective indicators. From the outset, objective indicators of country performance have been at the core of the MCC approach to development assistance. The concept is simple: the MCC will provide funding to countries that excel against performance indicators in three areas: ruling justly, investing in people and providing economic freedom. Selecting countries is not so simple.

The MCC’s 17 indicators of country performance are state of the art. But they are not embedded in concrete. The MCC has been pushing hard for improvements. A number of the independent providers of these indicators have tightened their procedures and methodology, and others have shortened the time between data collection and dissemination. The publication of updated country “scorecards” on the MCC Web site each year provides an unprecedented level of visibility linking country performance to donor assistance. In general, the MCC’s indicators have met broad approval in the donor community.

The “MCC effect” has been the most important benefit of these indicators. The MCC’s indicators provide a comprehensive, objective and highly visible system for comparing a country with its peer group and showing where its performance falls short. One academic study found that eligible countries improved their indicators significantly more after the MCC was established than in the pre-MCC period, and that eligible countries improved their indicators significantly faster than developing countries not eligible for compacts.

The MCC’s objective indicator approach has been very successful. Still, it is important to recognize certain inherent limitations. Four are worth singling out:

• The majority of the measures used to measure performance are available only with a time lag.
• The indicators reveal relative performance, not absolute performance. Good performers on the basis of the indicators still face daunting challenges.
• Even a top performing country is likely to see its ranking slip on one of the indicators at some point during compact implementation. This can create a credibility problem for the program even when the underlying trend is positive.
• Measuring corruption is especially problematic. The corruption indicator is probably state of the art, but corruption has many elements, and there is no agreement on which weights to assign to each one.

Recommendation: Retain and continue to refine the objective indicators.

2. Country selection. Initially, the MCC was limited to funding low-income countries. Since FY 2006, the MCC has been able to commit up to 25 percent of its resources to lower-middle-income countries. For FY 2008, these were countries with annual per capita incomes between $1,736 and $3,595. Together, the two groups included 95 countries.

The MCC board reviews country scorecards once a year and decides which countries to add to the eligibility list. Selection is not automatic based on the indicators. The board considers a wide range of political, economic and social factors.

The MCC’s overall track record in selecting countries is good but not brilliant. At the end of FY 2008, there were 18 countries with signed compacts, five threshold countries that had been declared eligible for compacts, and three additional countries declared eligible that were not in the threshold program. The few selections that have been criticized are cases where political factors might have tipped the balance in favor of the country.

Most of the selected countries have small populations, perhaps because it is easier to be transformational in a small country. Even large countries, however, have poor regions and a case can easily be made that the MCC might have a greater impact by focusing on one poor region in a large country like India or Indonesia than on one entire microstate like Vanuatu.

Recommendation: As long as the MCC’s funding level remains below $2 billion per year, stick with the current approach to selection but avoid new cases where political factors appear to be overriding performance indicators. At higher funding levels, give greater weight to improvements in absolute performance so that the indicators will not be a constraint to adding countries and enlarging the MCC’s impact.

3. Compact design. Compact design can be broken down into four elements: preparation, size, content and choice of partner. One of the hallmarks of the MCC approach to development assistance is an exceptional degree of participation by the host country government and civil society. In a relatively short time, the MCC approach to country ownership has set a high standard to which other donor agencies should aspire.

Compact size is seriously constrained by the statutory five-year limit on the length of a compact and by the prohibition against concurrent compacts. The limit leads to unrealistic expectations: anyone who believes a five-year program can be transformational does not understand development. The inability to have concurrent compacts has led the MCC to bundle together activities that would better be pursued separately. Within these constraints, compact size so far is defensible.

Regarding content, one early criticism of the MCC centered on its bias toward infrastructure projects. Agriculture and infrastructure were the clear priorities at the outset, based on partner-country priorities. These two sectors still account for more than half of all MCC funding, but attention to other sectors has grown. For example, funding for education was absent from the first 10 compacts, but was present in five of the next eight.

This evolution may reflect congressional pressure to be active in the social sectors despite evidence that more investment to expand productive capacity and lower costs could have a greater poverty reduction payoff.

The MCC has also shied away from non-project funding (budget support), which has the advantages of being fast-disbursing, having very low overhead costs and avoiding performance failure by rewarding countries for results recently achieved. Similarly, the MCC has yet to use its considerable ability to leverage funding from private investors, especially for infrastructure projects.

On partnership, all of the compacts to date have been with national governments even though the MCC has the authority to enter into compacts with regional/municipal authorities and private sector parties such as NGOs. With this narrow focus, the MCC is probably missing some opportunities to have a bigger impact.

Our major concern is that the design of the 18 compacts concluded so far reflects very little innovation. They can be characterized as collections of the kinds of development interventions that USAID, the World Bank and other donors have been undertaking for decades. Perhaps in the attempt to overcome its early start-up problems and minimize congressional criticism, the MCC has been too risk averse.

Recommendation: Immediately remove the prohibition against concurrent compacts that is a disincentive to improving performance. Allow the MCC to extend compacts beyond five years when unanticipated complications arise. Provide encouragement from the White House and Congress to be more innovative in compact design.

4. Compact implementation. No MCC compacts have been completed, so assessment of their impact is premature. One problem is the lag from the date of compact signing to the date of its entry into force, which has lengthened from about three months for the first three compacts to 10 months for the 10th and 11th compacts. This reflects the MCC’s tactical decision to delay entry into force until the legal framework is in place and the implementing organization is up and running. The normal process of tendering for infrastructure projects accounts for some of the slowness, and bad luck has also created recent problems in the form of unanticipated increases in fuel and commodity costs.

The choice of an appropriate local implementing agency is both difficult and critical to success. The objectives of country ownership and capacity building/institutional development argue for selecting an existing government ministry or agency. Realities on the ground have led the MCC typically to establish a special-purpose organization (“accountable entity” in the MCC’s jargon). In effect, the MCC has promoted strict accountability at the expense of building partner-country capacity.

The MCC’s approach to monitoring and evaluation is a source of pride, but it could become the program’s Achilles’ heel. The MCC’s recent decision to make public the “economic rate of return” analysis for each new compact puts it at the head of the donor community. Other donor agencies have been unwilling to take this step, except in a more opaque form. A potentially critical problem with the MCC’s approach is latent in the micro performance benchmarks established for each compact. It seems likely that the results will be mixed at the end of most of the compacts. Given the high expectations created for the MCC’s impact, the failure to show superior results could undermine congressional support for the MCC going forward.

Finally, the MCC has largely lived up to its billing as a lean organization. It is now fully staffed at its ceiling of 300 positions. The MCC’s field offices, established after compact signing, are typically limited to two positions.

Recommendation: Continue to refine implementation techniques to the point of becoming a pace-setter and develop performance benchmarks that are less likely to generate disappointment.

5. Threshold Programs. The MCC has committed some $360 million to 16 “threshold” countries. Nearly all of these programs are managed by USAID. Two different visions seem to coexist. One vision is to prepare countries for a compact within a year or two. A second vision is to address a particular “target of opportunity” that will help a country qualify for a compact eventually. It is too soon to say how effective these programs have been under either approach.

However, the individual projects funded under the threshold programs have been indistinguishable from the typical USAID project involving a contract with an American firm to field a team of expatriate advisors focusing on a particular sector. A fundamental problem with the threshold programs is that they give the impression of trying to boost performance scores by short-term actions rather than rewarding the kind of self-generated progress that is more likely to be sustainable.

Recommendation: As long as MCC funding remains below $2 billion per year, shift funding of threshold programs to USAID funding. This will help to ensure that the activities being funded are of high value, and encourage USAID to take a more strategic approach to its operations in low-income countries.

6. Governance. The MCC legislation created a board of directors with five ex officio members and four private sector members. Having private sectors members on the board is one of the great strengths of the MCC, enhancing its objectivity and credibility, helping to ensure bipartisan support, and providing strategic links to the broader development community. By comparison to the boards of other government corporations, the MCC board is small in size and more biased toward public-sector members. Having the secretary of state chair the board weakens the image of the MCC as an agency focused on long-term development.

Recommendation: Amend the MCC legislation to add four more private sector members to the MCC board, allow the board to elect one of its private sector members as chairman.

The Existential Issue.

Although the MCC has not yet lived up to its promise, it still has the potential of offering the biggest bang for the buck among all U.S. development assistance programs. Six features are not only worth keeping but strengthening further: rewarding good performance; using objective indicators to guide the selection of countries; focusing on low-income countries; achieving a high degree of country ownership; avoiding earmarks and time limits on spending authority; and keeping staff small.

However, the current operating level of less than $2 billion per year is far below the original concept. Retaining a separate agency for such a small program within a much larger bilateral assistance program is questionable. With funding moving toward the pace of $5 billion per year, and with added authority to have concurrent compacts, the MCC can be more innovative and more transformational.

The MCC has the potential of being the world's leading "venture capitalist" focused on promoting economic growth in low-income countries. As a core component of a foreign policy that relies more on partnership with other countries, the Obama administration can realize this potential by affirming the MCC's bold mandate, strengthening its leadership, and boosting its annual appropriations to at least $3 billion beginning in FY 2010.R. Kent Weaver is a Senior Fellow in Governance Studies at the Brookings Institution and a Professor of Public Policy and Government at Georgetown University. He is the author of the forthcoming book Reforming Social Security: Lessons from Abroad.

Lex Rieffel is a nonresident senior fellow in Brookings's Global Economy and Development program. He is a former U.S. Treasury official and teaches a graduate course at George Washington University.

James W. Fox, formerly chief economist for Latin America at USAID, is an economic consultant.