Performance-based aid

What happened during those 15 months is evidence of the potential ripple effects of the high-profile aid program – and the power of the threat to publicly shame countries that veer off the path of economic and political overhaul.

…commented John Danilovich, Millennium Challenge CEO, in an interview with the Wall Street Journal (subscription required) on Yemeni reform efforts. Yemen took steps to reduce corruption, cut its budget deficit, and reform its court system after the country lost access to MCCs grant program. The Journal writes:

Mr. Danilovich says the program creates an incentive for countries to make sometimes-painful policy changes, and points to Lesotho as proof. Traditionally, married women in the southern African country had the same legal rights as children; they couldn’t buy land or borrow money without permission from their husbands. With the Millennium Challenge Crop. pressing for changes, the Lesotho Parliament passed a law in November putting married women on equal legal footing with their husbands.

"Countries care really deeply about this seal of approval of good governance," says Sheila Heeling, a senior policy analyst at the Center for Global Development, a Washington think tank, she gives the Millennium Challenge Corp. "full credit" for Yemen's about-face.

The mix of performance-based access to funds and some public finger-pointing appear highly effective. The Millennium Challenge uses some of our Doing Business indicators to measure country performance. Since the Doing Business project started in 2003 the annually updated rankings have inspired reforms in over 50 countries.