It has become axiomatic in international development that increasing economic opportunities for women contributes to economic growth. Organizations from the World Bank to the Organisation for Economic Cooperation and Development (OECD) have concluded that women’s participation in the economy is linked to poverty reduction and gross domestic product (GDP) growth. Today, the question is not whether women’s economic participation matters—rather, it is how to promote this goal most effectively.
The Millennium Challenge Corporation (MCC), a U.S. foreign aid organization, has been at the forefront of answering this question. Last week, Dana Hyde, the chief executive officer of MCC, spoke at the Council on Foreign Relations about MCC’s innovative approach to reducing poverty and promoting growth around the world—including through the advancement of gender equality.
MCC is a young agency, celebrating its tenth anniversary just this year, and it governs a relatively small share of the U.S. government’s foreign assistance budget. Nevertheless, MCC has had an outsized impact, and has been heralded internationally for its commitment to results-based, data-driven foreign assistance.
MCC employs a competitive selection process, partnering only with countries that meet a set of rigorous policy indicators conducive to promoting economic growth. Once countries are selected, the organization works with in-country actors to identify priorities and facilitate local management, thereby fostering both country ownership and sustainability. It also insists upon comprehensive and transparent monitoring and evaluation as programs are implemented.
Critical to MCC’s economic growth strategy is its commitment to advancing gender equality. In 2006, MCC enacted a robust Gender Policy that requires consideration of gender inequalities in development, implementation, and evaluation of programs. Five years later, MCC expanded its guidance by introducing Gender Integration Guidelines, which provide specific operational instructions on how to integrate gender into development work, including through the recruitment of gender specialists in partner countries and the creation of country-specific gender integration plans.
To build on this progress, in 2012, MCC revised its country selection criteria to assess the degree to which potential country partners provide women the same legal capacity to work as men. This indicator assesses whether married and unmarried women can engage in ten different economic activities, including holding a job, registering a business, signing a contract, opening a bank account, and serving as a head of household. By adopting this indictor, MCC has not only changed its own practice—it has also sent a powerful message that ensuring an equal playing field for women and men in the economy is both a precondition of economic growth and a factor in whether a country will be entitled to partner with the U.S. government.
The addition of a gender equality indicator as a condition of MCC partnership is already paying dividends. The government of Cote d’Ivoire, for example, approached MCC to find a way to improve its laws on gender equality in order to bolster its competitiveness for U.S. assistance. Soon after, the country enacted a new law to give women the same rights as men to determine where they live, work, and travel. Such policy changes are sorely needed: according to the World Bank’s Women, Business and the Law report, 128 out of 143 countries today have at least one legal difference between men and women that restricts women’s economic opportunities. In 54 countries, women face five or more limitations.
Though MCC’s focus on legal reform to promote women’s economic participation is promising, there are a range of other gender inequalities that undermine growth and could be considered as well. One example is gender-based violence, which inhibits women’s economic participation and exacts significant costs: a World Bank report estimated the cost of this violence to range between 1.2 to 3.7 percent of GDP, depending on the country. Or consider the issue of child marriage, which is negatively correlated with girls’ education and economic potential: surely this factor should be considered as MCC develops a compact with Niger, which has the highest overall child marriage prevalence rate in the world.
MCC’s emphasis on fair and equal legal capacity as a condition of economic growth is significant both as a matter of policy and practice. To leverage funding even more effectively, MCC should consider incorporating other indicators of gender equality, in addition to legal equality in the economic sector, when evaluating whether potential partner countries have created environments conducive to poverty reduction and economic growth.