The microfinance sector only reaches about 160,000 borrowers, less than 1 percent of the adult population. AKDN established microcredit programmes as early as 2002, and in 2004 launched First MicrofinanceBank, the first of its kind under the country’s new regulatory structure. AKDN has pioneered the provision of innovative and flexible microfinance products in the country, which play an important role in driving economic development in rural areas.
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 187 countries in the Human Development Index in 2013, and it is estimated that 36 percent of its population lives below the national poverty line. The country’s financial sector is largely underserved, with only 9 percent of adults holding an account at a formal financial institution and 7 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 While the country remains dependent on international assistance, NGOs have withdrawn amid a deteriorating security situation, especially in remote areas.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 US$ 700 million has been channeled through the AKDN for Afghanistan’s reconstruction. AKDN’s 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. FMFB-A helps Afghans by offering a broad range of services and is actively engaged in research, product development and innovation to help increase access to financial services. Afghanistan was the first country in the region in which AKAM developed SME and housing finance products, supported by a grant from USAID to introduce construction advisory services, and this experience is part of a toolkit that has been developed by IFC to help other MFIs across the region. The Bank is the largest provider of financial services for micro and small businesses and households, with over 54,000 borrowers in 14 provinces and a portfolio exceeding US$ 59 million, including around US$ 12 million for small and medium entreprises. Since inception the Bank has disbursed more than 700,000 loans, with a total value exceeding US$ 400 million. The Bank has also provided financial services to more than 137,000 individual depositors. FMFB is engaged in multiple partnerships including cooperation with MISFA, a governmental organisation, for grants that have funded the hiring of agronomists to provide free technical services to farmer clients and the bank itself; AKF USA, for grants to improve agricultural finance; USAID, for loans for onward lending at a lower interest rate; and collaboration with the Ministry of Agriculture. Currently, enterprise loans constitute about 35 percent of the total portfolio value, followed by agricultural loans at 27 percent, SME loans at 18 percent and housing loans at 15 percent. Already the major provider of agriculture loans, which represent one-third of its portfolio, FMFB is in the process of 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. In order to address the security risks and the remoteness of many clients, FMFB 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, as well as opening new branches in commercial areas.