The State of Microfinance in Afghanistan

Examining Afghanistan'’s microfinance sector
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This report provides an overview of the state of microfinance in Afghanistan from the demand and supply sides up to the end of December 2008. It uses information provided by the MicroFinance Investment Support Facility for Afghanistan (MISFA), the Mix Market, independent researchers, reports produced by MFIs and donor agencies supporting the sector in Afghanistan. 

The report findings reveal that the microfinance sector in Afghanistan has enjoyed strong backing from the government and donors. It has sought to follow microfinance best practices, and build capacity and capital base of MFIs. There has been a deliberate approach to encourage scaling, which has led to rapid and impressive client outreach. The MFI sector has also managed to successfully target women. Most analysts agree, however, that this growth has come at a cost. The sector faces many challenges. These include:

  • Excessive reliance on one agency for funding;
  • Lack of staff capacity;
  • Weak management systems;
  • Low levels of sustainability and rising portfolio at risk;
  • Delivery strategies that impose a high cost on the borrower;
  • Limited product range;
  • Lack of information on how women actually benefit from loans.

About this Publication

By Hussein, M.