MICROCAPITAL BRIEF: Afghanistan Rural Enterprise Development Program to Model Microfinance Strategy on Pakistan Poverty Alleviation Fund

The Afghan government reportedly has decided to model its microfinance programs after the Pakistan Poverty Alleviation Fund (PPAF), a government program that provides loans, grants and technical assistance to microfinance institutions (MFIs). A delegation of the Afghanistan Rural Enterprise Development Program (AREDP), whose objective is to enhance the participation of rural men and women in economic activities by strengthening the private sector, recently visited Pakistan to observe the following PPAF initiatives: Programme for Increasing Sustainable Microfinance (PRISM) and Microfinance Innovation Outreach Programme (MIOP).

PPAF designed its programs under a risk-based model of credit and enterprises development that s consistent with Islamic law. PRISM has five components that include credit enhancement, an equity fund, an institutional strengthening fund, knowledge management efforts and program management assistance. MIOP is intended to increase access to productive assets, skills, services and improved technologies for poor rural women and men.

In Afghanistan, AREDP will seek to support: (a) community-led enterprise development aimed at 6,500 enterprise groups and 1,300 village and savings loan associations impacting half a million people; and (b) small and medium-sized enterprise (SME) development with a target to foster access to finance for 750 SMEs which have rural and agricultural linkages.

By Carol Kim, Research Associate

About Afghanistan Rural Enterprise Development Program (AREDP): AREDP is aimed at improving employment opportunities and income of rural men and women, and sustainability of targeted local enterprises. Over 75 percent of Afghanis live in rural areas where agriculture is primary activity. In efforts to address limiting economic development the project seeks to support: (a) community-led enterprise development aimed at 6,500 enterprise groups and 1,300 village and savings loan associations impacting half a million people; and (b) small and medium-sized enterprise (SME) development with a target to foster access to finance to 750 SMEs for which have rural and agricultural linkages.

About Pakistan Poverty Alleviation Fund (PPAF): The Pakistan Poverty Alleviation Fund (PPAF) is a government program that was established in 2000 with USD 90 million in funding from the World Bank and USD 10 million from the Pakistani government. PPAF provides loans, grants and technical assistance to microfinance institutions across the country. Support of the microfinance sector is part of a broader strategy of poverty alleviation that includes drought mitigation, education, and health interventions. As of June 2010, PPAF reported total assets of PKR 23.6 billion (USD 275 million).

Sources and Additional Resources:

Daily Times: “Afghanistan to follow Pakistan’s model for microfinance”, June 2011 http://www.dailytimes.com.pk/default.asp?page=2011%5C06%5C08%5Cstory_8-6-2011_pg5_11

MicroCapital.org: “MICROCAPITAL BRIEF: Reporting Tepid Growth, State Bank of Pakistan (SBP) Permits Microfinance Institutions (MFIs) to Accept Gold as Collateral, June 13, 2011, http://www.microcapital.org/microcapital-brief-reporting-tepid-growth-state-bank-of-pakistan-sbp-permits-microfinance-institutions-mfis-to-accept-gold-as-collateral/

MicroCapital.org: “MICROCAPITAL BRIEF: Microfinance Investment Support Facility for Afghanistan (MISFA) Announces Afghan Microfinance Sector Reaches $1b in Loan Disbursements”, May 10, 2011, http://www.microcapital.org/microcapital-brief-microfinance-investment-support-facility-for-afghanistan-misfa-announces-afghan-microfinance-sector-reaches-1b-in-loan-disbursements/

MicroCapital.org: “MICROCAPITAL BRIEF: Microfinance in Afghanistan Challenged by Culture, Religion, Gender Struggles”, January 10, 2011, http://www.microcapital.org/microcapital-brief-microfinance-in-afghanistan-challenged-by-culture-religion-gender-struggles/

MicroCapital’s Universe Profile: Afghanistan Rural Enterprise Development Program (AREDP), http://www.microcapital.org/microfinanceuniverse/tiki-i

MicroCapital’s Universe Profile: Pakistan Poverty Alleviation Fund (PPAF), http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Pakistan+Poverty+Alleviation+Fund+%28PPAF%29

Browse the MicroCapital Universe and add your entry to the wiki at http://www.microcapital.org/microfinanceuniverse/

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