Paper

Evolution of Microfinance Sector in Afghanistan

Examining challenges for the microfinance sector in Afghanistan
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This paper reviews the development of microfinance in Afghanistan and the key role played by Microfinance Support Investment Facility for Afghanistan (MISFA). Microfinance emerged in Afghanistan in 2002 as part of a rehabilitation process to provide social protection and alternative means of livelihoods to the poor. In the absence of domestic microfinance expertise, international NGOs were invited to establish microfinance in the country. In addition to this, government and donors promoted MISFA, an apex level funding and capacity building institution, in 2003. The paper states that:

  • MISFA supports MFIs in scaling up outreach and developing sustainable microfinance services;
  • 15 NGO type MFIs cover 23 provinces currently;
  • High operating costs adversely affect sustainability of MFIs in Afghanistan;
  • MFIs, until recently, developed products, institutions, clients, and charges as they wished due to lack of regulations;
  • Donors and governments have also encouraged rapid scaling in client outreach, helping the sector grow rapidly in a short time.

Currently, the microfinance sector is subsidized by MISFA, making MFI sustainability a critical issue for future growth. The government needs to step in and give a new policy direction to the sector.

About this Publication

By Saxena, S.
Published