MICROCAPITAL STORY: World Bank Approves $30m Grant to Microfinance Institutions in Afghanistan Provided by International Development Association (IDA)

The World Bank has approved a USD 30 million grant to microfinance providers in Afghanistan under the Expanding Microfinance Outreach and Improving Sustainability Project. The project is designed to scale up financial outreach to poor people, particularly women, across Afghanistan and to increase the financial self-sufficiency of microfinance institutions (MFIs).

The grant is provided by the International Development Association (IDA), the World Bank’s concessionary lending arm. The funds will be sent through the Ministry of Finance and loaned to the Microfinance Investment Support Facility for Afghanistan (MISFA). MISFA will be the implementing agency that will use the project funds to on-lend to local MFIs. A significant part of the grant will be used to support legitimate economic opportunities in seven poppy growing provinces identified by the government.

MISFA was founded in 2003 by the Afghan government as the vehicle through which government and donors could channel funds to build up the lower end of the financial sector. MISFA aids MFIs in a variety of capacities including start-up, scaling up operations, building systems for transparent reporting and instilling a culture of accountability.

A major goal of this grant is to ensure the continuation of the ongoing Microfinance Support for Poverty Reduction Project, funded through the Afghanistan Reconstruction Trust Fund (ARTF). Since its establishment in 2003, the initiative has disbursed approximately USD 15 million in loans on average every month, added 10,000 to 15,000 clients per month, provided a total of over USD 100 million and created 600,000 jobs. Currently in Afghanistan, there are 15 MFIs with over 249 branches in 23 provinces, serving more than 410,000 clients. Seventy percent of these clients are women.

According to Stephen F. Rasmussen, World Bank Lead Financial Specialist, Project Team Leader and CGAP Advisor, microfinance has been “one of Afghanistan’s economic success stories of the past four years.” He said, “In a country where there is very little formal finance available for investment, the microfinance program has already demonstrated its ability to reduce poverty and create economic opportunities and employment for poor people right throughout Afghanistan.”

In addition to funds provided by government and donors, many of Afghanistan’s MFIs have begun increasing their funding diversification with financing from commercial sources.

Additional Resources:

Microfinance Gateway: “Microfinance in Afghanistan Gets US$30Mln Boost from World Bank.”

World Bank

World Bank: Press Release: “World Bank Grant Seeks To Ensure Sustainability For Microfinance In Afghanistan”:

World Bank: International Development Association (IDA)

World Bank: Afghanistan Expanding Microfinance Outreach and Improving Sustainability Project

Microfinance Investment Support Facility for Afghanistan (MISFA)

Afghanistan Reconstruction Trust Fund (ARTF)

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