Aga Khan Agency for Microfinance

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Products for Small and Medium Enterprises (SME)

The role of AKAM institutions in the provision of SME financing is part of the broader AKDN economic development strategy.Small and medium enterprises (SME) are often referred to as the “missing middle” in emerging market economies. The role of AKAM institutions in the provision of SME financing is part of the broader AKDN economic development strategy. SME financing is designed to contribute to the AKDN vision for the seamless provision of financial services, starting from the most basic and informal community savings and lending groups, through formal microcredit and SME lending, and finally on to commercial finance as provided by some of the AKFED institutions. As part of this integrated vision, SME financing supports increased capacity for local production and job creation, is coordinated with other AKDN market development initiatives, and encourages basic standards for labour and environmental protection.

SME lending contributes to the development of an integrated framework of financial services and economic stimulation through the achievement of the following objectives:

• Reaching out to the poor and creating sustainable large-scale employment, financial growth and the development of SME businesses;
• Expanding services to the SME sector or “the missing middle” that may often be at the other end of the poverty spectrum;
• Assisting successful microentrepreneurs to graduate to SME with the eventual objective of further evolution to commercial finance;
• Expanding the outreach of SME financial products in specific target geographies;
• Partnering with other international organisations and donors who will bring more technical assistance and resources to AKAM affiliates for SME lending; and
• Applying international best practices, lessons learned, and the SME appraisal and risk management approach to the expansion of SME lending in the AKAM network.

AKAM and the First MicroFinanceBank-Afghanistan (FMFB-A) established an SME department in 2005. Today, SMEs are being offered to clients from 18 branches throughout the country. The current outstanding portfolio is 452 active SME borrowers with a portfolio of US$ 6 million. These SME borrowers support over 12,000 full and part-time jobs. SME practices are now being introduced in most AKAM countries.