Rural Microfinance Expansion with First MicroFinance Bank of Afghanistan

MEDA is supporting a leading microfinance institution in Afghanistan, the First Microfinance Bank (FMFB) to successfully expand its microcredit products to more rural areas of the country.  The Afghanistan economy continues to be predominantly agriculture and livestock focused – 32 percent of the country’s Gross Domestic Product (GDP) comes from agriculture, and 80 percent of the labour force in rural communities depend on agriculture activities.  Despite this, the availability of finance services for rural and agricultural enterprises remains extremely limited due to high operating costs and high risk perception by financiers – in total only 1.5 percent of the formal bank financing is into rural areas.

Operating since May 2004, FMFB provides a variety of credit, savings and payment products and services focused on the development of micro-enterprises, small businesses and the creation of productive, sustainable sources of income and employment. FMFB is committed to extending its reach to the majority of Afghans that reside in rural settings, and the bank’s rural strategy includes setting up infrastructure and extending its branch network beyond the provincial capitals.  To date, the bank has established a network of 45 branches, covering 51 rural districts.  As at December 31, 2010, the Bank’s rural loan balance was valued at $15.1 million with about 14,000 active clients; about 26% of all active loans were for farm activities.

MEDA’s support is made possible through a grant from the Microfinance Support Facility of Afghanistan via funding from the Afghan Ministry of Agriculture, Irrigation and Livestock.

MEDA is supporting the bank in several phases.  First, we assisted First MicroFinance Bank to identify market opportunities for rural and agricultural credit and determine what financing clients need for their rural businesses and farms.  Using this information, as well as research about the agricultural value chains in the selected provinces, next MEDA helped First MicroFinance Bank to design new financing products and create a business strategy for delivering these products.  This includes necessary improvements to internal systems, training staff on agricultural lending techniques, and researching potential agricultural support organizations for partnership opportunities with the bank. Finally, MEDA will prepare the bank’s team to pilot test the product in several branches in the north of Afghanistan and evaluate the pilot prior to commercial expansion of the rural microcredit product.

With MEDA’s support, the First MicroFinance Bank hopes to increase their rural clientele by about 20 percent by 2013.  This will mean that over 2,800 rural households and farmers in Afghanistan will gain better access to appropriate microcredit services, allowing them to invest in their enterprises and farms and earn a better livelihood for themselves and their families. 

Project Quick Facts

Goal : Support our partner financial institution in Afghanistan, The First MicroFinance Bank, to successful scale up their rural microfinance portfolio by 20 percent

Reaching : 2,800 rural and agriculture microenterprises

Funding : Microfinance Support Facility of Afghanistan (MISFA), with support from the Afghan Ministry of Agriculture, Irrigation, and Livestock

Project length : September 2011 to February 2013