The Journey to Inclusive Finance in Afghanistan.

April 16, 2017

$59 million

mobilized in private financing

102,700

families benefited from financial improvements

60

finance sector reforms drafted and adopted

Enhancing the Use of Mobile Money

To foster a healthier environment for lenders, FAIDA addressed significant policies to build trust and transparency. One of the largest banks, Da Afghanistan Bank (DAB), made several key amendments to existing mobile banking provisions. These amendments included stricter regulations and enforcement on suspicious transaction reporting, as well as measures to improve transparency and accountability among mobile money operators, agents, and merchants.

As a result, after the Supreme Council of DAB approved and implemented the amendments in 2011, DAB received its Electronic Money Institution (EMI) License in July 2013. In 2015 and 2016, FAIDA provided several additional rounds of comments on the updated EMI regulations to DAB, focusing on reducing barriers to entry and investments — a key part of ensuring continued growth of the EMI sector.

 

Supporting Islamic Services

According to World Bank data, only 10 percent of Afghans hold accounts with a financial institution. In addition, 34 percent of Afghan adults cite religious reasons for not having a bank account. To support financial institutions in becoming Sharia-compliant, FAIDA established a product design and development team to work in Afghanistan’s emerging Islamic banking sector. The team designed the Islamic Finance Window Operating Model to help banks and other financial institutions offer Sharia-compliant services.

Ultimately, these services allowed more Afghans — many living in rural parts of the country — to access services and products. For example, availability of murabaha, or financing that shares profit and loss between borrower and lender, was previously limited. With program support, five financial institutions offered murabaha and other new products in 2012. In 2013, nine additional financial institutions began offering these products to Muslim consumers. Mohammad Nazir Ayoubi, an auto parts dealer in Herat, was one such consumer.

“It was very important to get additional capital for my business, but I wanted a loan that followed Sharia principles,” he explained. With the loan he secured, Mohammad was able to invest in his business.

“It was very important to get additional capital for my business, but I wanted a loan that followed Sharia principles.”

Mohammad Nazir Ayoubi, an auto parts dealer in Herat

"The Women in Financial Sector Internship program has provided me a big opportunity to … learn important professional skills that are not taught in Afghan universities."

Samira Aslami, Afghan woman who enrolled in internship program

Expanding Financial Access to Women

With an emphasis on inclusion, FAIDA implemented programs to encourage the financial participation of previously underserved individuals. For the first time, many Afghans living in rural parts of the country and women could participate in the financial sector. Opportunities like multifaceted training programs, internship programs, and networking events gave women the chance to improve their financial literacy and encouraged their participation in the sector.

One Afghan woman, Samira Aslami, enrolled in an internship program and spoke about how the opportunity helped her establish her career.

“The Women in Financial Sector Internship program has provided me a big opportunity to … learn important professional skills that are not taught in Afghan universities,” she reflected. “The six-month internship program is in fact a six-month professional experience for Afghan women and has made finding a job much easier.”

The Future of Afghanistan’s Financial Sector

By working closely with the private sector, FAIDA improved Afghanistan’s financial infrastructure and bolstered job creation, benefitting thousands of Afghans and their families. By the end of the project in 2016, 7,064 full-time equivalent jobs were created, and 102,700 families reaped financial benefits. The project’s emphasis on inclusion helped grow the ratio of rural-to-urban loan clients to 50:100, and 33 percent of FAIDA participants were women. And through connections forged by FAIDA, key Afghan banks and financial institutions established transparency and accountability mechanisms and drafted and adopted 60 financial sector reforms.

By the end of its six years, FAIDA had supported the Afghan banking sector to grow stronger, enabling more citizens to participate in the financial sector and putting the country on a positive economic trajectory. However, there is still much work to be done, with many more individuals and businesses to reach and empower.

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