The Microfinance Sector of Afghanistan

By: Najibullah SamimCEO of MADRAC &Chairman of the Afghanistan Microfinance Association (AMA)

Microfinance in post-conflict, post-disaster situationA session at the Africa-Middle East Regional Microcredit Summit 2010Nairobi, Kenya – April 2010

AFGHAN HISTORY

1979-1988: The Russia’s invasion

1988-1992: Internal war between different parties

1992-1996: Internal war between different Mujahideen parties

1996-2001: Internal war between Mujahideen and the Taliban

2001-Present: Ongoing war between Taliban and

Afghan Government

3 decades of war and conflict

AFGHAN HISTORY

About 1.5 million Afghans died and about1 million were disabled.

About 5 million migrated--mostly to Iran and Pakistan.

Infrastructures seriously damaged/destroyed.

Development works were almost stopped

Women did not have access to education and work mainly during the Taliban regime.

3 decades of war and conflict

MICROFINANCE IN AFGHANISTAN 2002: NGOs introduce microfinance, serving a combined

total of only 12,000 poor Afghans.

2003-2006: GoA-MRRD and WB-CGAP create MISFA MISFA transforms into non-profit LLC

2008-2009: No. of MFI partners grow from 4 to 16 All MFIs register with GoA as not-for-profit

organizations MFIs cover 70% of all provinces, serving more

than 400,000 poor Afghans; 60% of whom are women.

MICROFINANCE IN AFGHANISTAN

Key Indicators

Nov. ‘09

No. of MFIs 15Provinces covered 27

No. of branches 309Active clients 438,508Gross loans outstanding, US$ million

108

Women clients 60%No. of staff employed 4,109

MICROFINANCE IMPACT

Findings of a study on Gender Mainstreaming in Microfinance

Percentage of women clients vs. non-clients Clients Non-clients

Participating in household business decisions

74.5% 52.5%

Participating in household economic decisions (e.g. expenses on food, health, education, etc.)

77% 61.1%

Making purchases independently 87.4% 46.5%

Findings of the 2007 Baseline Impact Study, IDS, Sussex Uni., UK

Percentage of MF clients vs. non-clients Clients Non-clients

Clients reporting improvement in economic situation (from past year)

72% 51%

Client households with savings 46% 31%

MICROFINANCE IMPACT Afghans used loans mainly

for starting or expanding business

Business start-up/expansion Operating capital Health, education, food,

housing

16%

4%

80%

For every borrower, 1.5 job opportunities sustained or created

64% female clients and 74% male clients generated employment for themselves.

Nearly 45% of all clients generated employment for others.

Source: Baseline and Impact Study, a research commissioned by MISFA in 2007.

MICROFINANCE IMPACT

44% of women clients gained absolute control over their money vs. 18% of non-client counterparts.

80% of women clients reported “improved attitude” of husbands + other relatives, after the loan.

91% of women clients reported enjoying good relationship with other group members.

More IDS study findings:

AFG – MF OPERATION IN POST CONFLICTAssuring repayment

Government involvementInvolving local/community leaders in the operationPracticing group guaranteeDemand-driven products (Shari’a-compliant products)Respecting cultural values (female staff for female clients)Flexible services and productsSpecial operational security measuresLocalized human resources

ENVIRONMENT – ENABLING FACTORS International community support (financial

and technical) Government involvement Growing economy and relatively stable

currency Demand for microfinance services (refugees

returning home and starting new businesses) Private sector development (government

intention for privatization).

ENVIRONMENT – DISABLING FACTORS Security (affects MF operations in some

areas of the country)

Occasional resistance from local religious leaders

Natural disasters (flood, draught, extreme cold weather, etc.)

Staff turnover

High cost of service delivery

Thank you!