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| Introduction |
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The Microfinance Investment Support Facility for Afghanistan (MISFA) was set up in 2003 at the invitation of the Afghan government - to get donor coordination right from the start and avoid the counter-productive efforts that have emerged from conflicting donor objectives in other post-conflict situations. It was established as a vehicle through which the Afghan Government and international donors could channel technical assistance and funding to build Afghanistan’s microfinance sector, though more recently this mandate was expanded to include the lower ranges of small and medium enterprises (SME) lending. MISFA was the first facility of its kind, pooling diverse donor funding mechanisms and converting them into streamlined, flexible support to microfinance institutions in Afghanistan, tailored to local priorities and accompanied by technical assistance and strong performance monitoring.
In March 2006, MISFA registered as a limited liability non-profit company whose sole shareholder is the Ministry of Finance of the Islamic Republic of Afghanistan. MISFA Ltd is an independent apex organization with 15 implementing partners-Microfinance Institutions, also known as MFIs - on the ground. MISFA functions as either the exclusive or primary provider of funds for all these MFIs partners.
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Mission
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MISFA’s mission is to facilitate the development and growth of a long-term, strong and healthy microfinance sector in Afghanistan that provides high quality and efficient financial services to low income people. This is achieved through a grant and loan process that identifies strong partner organizations and encourages"“best practice" delivery of appropriate microfinance products and services by these partners.
The Board of Directors is responsible for the overall management of MISFA. The Board is comprised ofseven members representing the government of Afghanistan, donors and the private sector.
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Mandate and Milestones
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- Outreach. The Afghan microfinance program has seen a substantial growth and expansion during the past few years. As of February 2009, all these 15 MFIs-with a network of 286 branches - have served 439,821 savings and loan clients - with an outstanding portfolio of US$103.8 million - in 24 of Afghanistan's 34 provinces. Since inception in 2003, the program has disbursed a total of 1.3 million loans worth US$583.2 million across Afghanistan.
- Sustainability. Despite increasing security costs, two of MISFA's MFI partners have achieved operational surpluses before even reaching five years of operation; 4 partners are above 70 percent or more operationally sustainable; and among the remaining 5 are 50 percent or more operationally sustainable.
- Afghanization. Through the encouragement of MISFA, the Afghanization of the microfinance sector is proceeding apace. Microfinance institutions already provide employment for a total of 4,491 Afghans. Over 90 percent of professional positions and 50 percent of management positions in the sector are occupied by Afghans.
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The legal status of MFIs has been transformed from NGOs to that of non-profit companies as permanent institutions under the laws of Afghanistan.
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| Microfinance in Afghanistan: Sector Growth |
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Actual |
February
2009 |
Active Clients |
439,821 |
Percentage of women |
62% |
Gross Loan Portfolio, in US$ million |
103.8 |
Loan outstanding per borrower, in US$ |
306 |
Cumulative repayment rate, % |
94.40% |
OSS (weighted) |
77% |
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Small and Medium Enterprise (SME) Initiative
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.Small and Medium Enterprise (SME) Initiative
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| One important development has been the creation in late 2006 of an SME window within MISFA that on-lends funds through local banks for small and medium enterprise loans, with support from USAID. These SME loans range from US$3,000-300,000. Currently, MISFA has five partner banks that are actively providing access to finance for Afghan SMEs. The MISFA/SME partners are: First Microfinance Bank, Bank Alfalah, BRAC Afghanistan Bank, Afghanistan International Bank and the Afghanistan Rural Microfinance Program. Thus far, the program has provided trainings to more than 242 loan officers and managers, as well as strategic advice to four banks and/or financial institutions. As of Feb 28th 2009, MISFA/SME Partners combined to disburse 641 loans, with a collective value of $18.1 million |
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| Funding Sources |
| MISFA is supported by the Government of Afghanistan, CIDA, DFID, World Bank, CGAP, USAID, SIDA, Oxfam Novib, AusAID as well as from the embassies of Finland, Denmark and The Netherlands. |
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| Findings of MISFA Baseline/Impact Study |
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MISFA commissioned an independent study in September 2007 to assess the social impact of the microfinance sector in Afghanistan and establish a baseline. The study was conducted by Dr. Martin Greeley and Mohit Chaturvedi, microfinance experts from the Institute of Development Studies, University of Sussex, United Kingdom. The study showed that a majority of the credit is used to establish new businesses, with each loan creating 1.5 new jobs. In addition, 80 percent of female clients reported that their husbands and other relatives displayed “improved attitude”, and that clients were better off than non-clients.
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