The Situation in Afghanistan
Although it has witnessed exponential growth in its economy since 2002, Afghanistan remains one of the world’s poorest countries. It was ranked 169 out of 189 countries in the Human Development Index in 2020. A World Bank survey in late 2021 found that 70 percent of Afghan households had insufficient income to meet basic needs. The country’s financial sector is largely underserved, with only 10 percent of adults holding an account at a formal financial institution and seven percent having a loan. While the country remains dependent on international assistance, NGOs have withdrawn amid a deteriorating security situation, especially in remote areas.
With the support of donors and partners, more than $1 billion has been channelled through AKDN agencies for Afghanistan’s reconstruction. Our programmes include:
- large-scale rural development;
- health, education and civil society programmes;
- microfinance services;
- the rehabilitation of historic neighbourhoods in Kabul and Herat;
- a rapidly growing mobile phone network; and
- the renovation of a five-star hotel in Kabul.
AKDN’s microfinance services include the First MicrofinanceBank of Afghanistan (FMFB-A). This helps Afghans by offering a broad range of services while actively engaging in research, product development and innovation that helps increase access to financial services. Afghanistan was the first country in which AKAM developed SME finance products, supported by a partial guarantee fund from Deutsche Investitions-und Entwicklungsgesellschaft (DEG). With support from the IFC and USAID, FMFB-A also developed a housing microfinance loan product with integrated construction advisor services. This promotes better-quality construction, including seismic retrofitting, energy efficiency, sanitation and proper ventilation.
This experience is part of a toolkit that has been developed by IFC to help other microfinance institutions (MFIs) across the region. The Bank is the largest provider of financial services for micro and small businesses and households, with over 58,000 borrowers in 14 provinces and a portfolio exceeding $68 million, including around $15 million for small and medium enterprises. Since inception the Bank has disbursed more than 630,000 loans, with a total value of around US$ 0.8 billion. The Bank also provides financial services to more than 258,000 individual depositors.
These activities are supported by multiple partnerships, including MISFA, a governmental organisation, IFAD, the Ministry of Agriculture, KfW, IFC and FMO.
Currently, lending in rural areas constitutes about 37 percent of the total portfolio value, followed by SME loans at 25 percent and housing loans at 14 percent. Already a major provider of agriculture loans, which represent more than one-third of its portfolio, FMFB is launching new products in the agricultural value chain in the predominantly rural country in order to integrate the various players – input suppliers, implementing partners and institutional buyers – for the purpose of improving trust, quality and stable supply and demand. FMFB is also the only MFI offering housing loans.
Expanding our Reach
In 2017, FMFB-A opened the country’s first women-only branch, served and supervised by all-women staff. It allows Afghan women to manage their finances in a safe and facilitating environment, thereby overcoming social and cultural hurdles to their economic empowerment. Female borrowers now account for 26 percent of all borrowing from FMFB-A.
In order to address the security risks and the remote location of many clients, FMFB-A is pursuing mobile banking initiatives that are financially accessible, overcome connectivity and service issues, and have low operational costs. Other projects to expand reach include developing a dedicated livestock loan product, the introduction of ATMs, international remittance and deposit services, an educational loan product and SMS banking.