Amid shutdown and transformation, what’s going on with MCC and DFC?

After 10 months of upheaval, two U.S. development agencies — the Millennium Challenge Corporation, or MCC, and the U.S. International Development Finance Corporation, or DFC — have managed to hold their ground. It wasn’t always a sure bet, especially for MCC. But nearly a year after the Trump administration’s overhaul of foreign aid began, both agencies have quietly returned to work. Former MCC leaders spoke about how the agency could better position itself for aid’s new world order at the Devex Impact House on the sidelines of the World Bank and International Monetary Fund annual meetings. “Each one of those advantages that MCC has, in terms of its effectiveness, comes with a disadvantage,” said James Mazzarella, who served as senior director at the National Security Council during the first Trump administration, overseeing MCC, and later as an alternate member of the MCC board. “It might be the right speed to be effective, but it’s not the right speed to meet the moment of the current administration’s needs.” MCC’s battle to stay afloat Throughout the year, most were — at least relatively — confident that DFC would stay afloat. Unlike more grant-dependent agencies, DFC relies less on annual appropriations and more on returns and loan repayments, earning it bipartisan support in the U.S. Congress. The MCC’s grant-based model, on the other hand, works through “compacts,” which offer time-bound grants to countries that meet strict governance and reform standards to spur economic growth. That approach, it seems, opened MCC up to political pressure, and in April of this year, staff at MCC were told the agency would be effectively shuttered. But today, the organization seems to have survived the cuts that tore apart USAID. In July, the organization announced it had completed the Trump administration’s foreign aid review — and while half of its programs were slated for cancellation, it was better than the near-complete collapse that faced MCC’s peer agencies. In August, the agency’s board announced new partnerships, with MCC stating that new investments in Fiji and Tonga underscored the United States’ “enduring commitment to the Pacific,” and the creation of “stronger investment climates” in the region. And one month later, the U.S. State Department joined MCC in signing an energy compact agreement in Côte d’Ivoire, with Deputy Secretary of State Christopher Landau stating the partnership reflected Trump’s “commitment to smart, accountable development that advances U.S. interests.” In an earlier statement, Landau also said MCC was an “important tool to advance President Trump’s America First foreign policy agenda,” something that MCC’s supporters said signals that the agency, once rattled by proposed cuts, has carved out a steadier path — and a clearer role — in U.S. foreign aid. “MCC continues,” said Alice Albright, who served as MCC’s head until January 2025. “I think these are green shoots of good.” For Albright, MCC’s resilience is down to two main factors she found sacrosanct: The first, MCC’s compact model; and the second, the way MCC values partner countries’ eligibility for grants. The former, Albright said, ensures that partner countries contribute to a project’s success — and as a result, are better poised to take over once the U.S. exits. The latter, she added, ensures countries are on “the right path” to benefit from MCC funding. By grading countries on their electoral processes, inflation rates, corruption control, and other factors, MCC can target aid to governments it feels will use it most effectively. “There’s a growing realization that aid is only effective in countries that are actually making the changes themselves: to have open markets, to have free and fair elections, that are democracies that have rule of law,” Mazzarella agreed. “And aid dollars in countries that don't adhere to this freedom agenda are never going to be prosperous.” Still, Albright added, MCC’s stability isn’t set in stone — especially when the entire concept of foreign aid continues to be up for debate. “I do worry about MCC’s future,” Albright said. “Right now, it seems to be holding strong, but you could easily see a situation where any of [those factors are] cast aside, then somebody could ask the question, well, why have it to begin with?” Adapting for the future Mazzarella sees it slightly differently. Each advantage MCC has, he said, also comes with a disadvantage: the eligibility criteria, for example, has been criticized for being overly rigid — and in the process, excluding countries that could be a good fit for the compact model. “I think we need to go ahead and remove some of these hurdles in the scorecard,” he said. “You still need to keep an evidence-based approach about which countries are trying to change themselves and better themselves and have good governance, because that's the most effective place to put any development dollar.” “But do we have to have the hard hurdles?” he added. “Probably not.” During Albright’s tenure, that’s what she tried to do: the former MCC head pushed Congress to pass the Millennium Challenge Corporation Candidate Country Reform Act, which allowed MCC to expand the pool of countries it could work with after its passage last year. As a result, 33 countries were added to MCC’s candidacy list — but still, Albright said, there was more the MCC could do to adapt. One example was a further examination of a country’s private sector ecosystem, she continued, and whether countries have the right conditions in place for the private sector to maximize growth. “Now, how do you actually measure that? To be determined,” Albright said. “But that's an area that when you think about keeping MCC as fit for purpose as possible, I would begin to bring in more.” The future of DFC While MCC’s challenges have been more front and center, DFC has also waged its own battle with the Trump administration. Earlier this month, the organization’s authorization to operate lapsed amid the broader U.S. government shutdown, blocking the agency from making new commitments or engaging in nonessential business until its authorization is renewed. The House of Representatives and Senate have different proposals for how DFC should operate — but a final bill didn’t make it across the finish line in time before the authorization’s lapse. Despite that, Mazzarella said the agency was “definitely not dead yet,” adding that by the end of the year, most expect the authorization to move ahead. Still, that’s not without uncertainty. Even once the government reopens, the agency will need, at minimum, a temporary extension of its authorization to continue its work. There are also questions about what that work will look like in the post-USAID world, especially given the Trump administration’s proposed vision of DFC, which paints the organization as leaning into national security objectives and sliding away from its development mandate. “One of the main sticking points is … [is DFC] going to maintain its development focus, or is it going to be a place where we can give loans in high-income countries?” he added. “Any sort of political leadership is going to want to go to where the funding is easiest and there's less risk, and that is in high-income countries where there might be a national security [opportunity].” For both Mazzarella and Albright, the questions around MCC and DFC represent something larger and looming. With a country changing its approach to foreign aid, even the most palatable development tools are changing, too. “We have had a role internationally going back decades, and it's been important to us, and I think it will continue to be important to us,” said Albright. “I think the question is, what is fit for purpose?” Update, Oct. 21, 2025: This article has been updated to clarify James Mazzarella’s former title.