Private Sector

In October 2006, USAID launched the $80 million Agriculture, Rural Investment and Enterprise Strengthening (ARIES) Program. Administered by the Academy for Educational Development in partnership with FINCA, the World Council of Credit Unions, ACDI/VOCA, MISFA, and Shorebank International, ARIES aimed to create a strong foundation for a sustainable, market-driven rural finance program in Afghanistan that would also expand employment opportunities. By establishing or partnering with commercial banks, microfinance service providers and rural financial cooperatives, ARIES supported the provision of a broad range of financial services to rural microentrepreneurs and households. ARIES accomplishments included 222,000 loans delivered to 65,000 borrowers and $130+ million in capital injected into the Afghan economy through 119 financial services outlets. ARIES was particularly successful in reaching out to female borrowers who represent 49 percent of clients by loans made. In September 2009, ARIES had ongoing activities in 24 of Afghanistan’s 34 provinces. Models for expanding access for formal financial services under ARIES included:

• Creating a network of Sharia-compliant Islamic Investment and Finance Cooperatives (IIFCs), which offer nearly 40,000 formerly unbanked Afghans access to savings, loans, and leasing services.
• Establishing a wholesale window for small and medium enterprise lending in the Microfinance Investment Support Facility for Afghanistan (MISFA-A), which supports commercialization of the Afghan financial sector.
• Establishing a non-banking financial services company, Afghanistan Rural Finance Company (ARFC), which guides and lends to rural and agribusiness small and medium enterprises.

This report includes a general overview of program accomplishments and impact, detailed sections on the activities under specific program components, along with sections on challenges and lessons learned.

The following is one in a series of briefs highlighting the experiences and lessons learned under the USAID Agriculture, Rural Investment and Enterprise Strengthening (ARIES) Program. A $100 million, three-year initiative, ARIES aims to create a strong private sector foundation for a sustainable, market-driven, rural finance system in Afghanistan. Each implementing partner focuses upon a different component of the financial landscape, from household micro-loans of less than $200 to loans of over $1 million to larger scale Small and Medium Enterprises (SMEs).

This Program Brief focuses on the ARIES effort to stimulate lending to small and medium-sized enterprises (SMEs) with ACDI/VOCA through the establishment of an independent finance company, the Afghan Rural Finance Company (ARFC). The ARFC’s objective is to support the creation of sustainable employment through long-term value chain financing. ARIES choose a strategy of direct investment in existing cooperatives and other private sector agriculture-related firms. ARFC supports the upper tier of SME financing with loans ranging from $20,000 to over $2 million. Within the overall ARIES scale, this is the highest level of loan products supported.