MICROCAPITAL.ORG STORY: Government of Italy Provides $9.1m to MicroFinance Investment Support Facility for Afghanistan (MISFA)

Afghanistan´s finance minister Omar Zakhilwal and Italy’s ambassador to Afghanistan, Claudio Glaentzer, have signed a bilateral agreement under which the Italian government will provide USD 9.1 million (Euro 6.4 million) to the Afghan microfinance sector. The money will be given to a trust fund within the Ministry of Finance, managed by MicroFinance Investment Support Facility for Afghanistan (MISFA), an independent agency. Under the agreement, the loans will be disbursed to poor Afghans in the western provinces of Herat, Farah and Baghdis, where Italian troops operate [1]. The agreement coincides with an announcement by Italian Defense Minister Ignazio La Russa that 400 of Italy’s 3,000 troops in Afghanistan would be withdrawn after the November 7^th election [2].

Founded in 2003 by an Afghan government initiative, MISFA was the first facility in Afghanistan to pool donor funding and distribute it to local microfinance institutions (MFIs). Currently, MISFA acts either as the exclusive or primary provider of funds to all 15 MFIs in the country. As of February 2009, these 15 MFIs had 286 branches serving 439,821 clients – 62 percent of whom were women – and an outstanding portfolio of USD 103.8 million. Since its founding in 2003, MISFA partners have disbursed 1.3 million loans worth USD 538.2 million across 24 of Afghanistan’s 34 provinces [3]. The MIX Market, the microfinance information clearinghouse, provides data on 15 MFIs in Afghanistan [4].

In March 2006, MISFA registered as a limited liability non-profit company, with the Afghan Ministry of Finance as its sole shareholder. Later that year, with support from USAID, MISFA partnered with five banks to provide loans to small and medium enterprises (SMEs). As of February 2009, these partners had disbursed 641 loans totaling USD 18.1 million. Other funding sources include the Government of Afghanistan, Canadian International Development Agency (CIDA), UK Department for International Development (DFID), World Bank, Consultative Group to Assist the Poor (CGAP), Swedish International Development Cooperation Agency (SIDA), Oxfam Novib, AusAID and the embassies of Finland, Denmark and The Netherlands [3]. For more information on MIFSA, refer to this previous Who’s Who In Microfinance article featured on MicroCapital [5].

Since 2001, the Italian government has contributed over USD 690.1 million (Euro 466 million) to fund infrastructure, health and other cooperation activities in Afghanistan. USD 74 million (Euro 53 million) has been allocated to the western provinces of Herat, Farah and Badghis [6].

Commenting on this bilateral agreement, Italy’s Director General of Asia, Oceania, the Pacific and Antarctica, Mr. Attilio Massimo Iannucci, said, “The fight against terrorism and the country’s stabilization are a long-term plan providing humanitarian and economic assistance. Many insurgents would leave the guerrillas if they had a job” [1].

By: Stefanie Rubin, Research Assistant

Bibliography

[1] Adnkronos International: “Afghanistan: Bilateral Agreement Gives Microcredit to Afghans”: http://www.adnkronos.com/AKI/English/Business/?id=3.0.3916142158

[2] Xinhua News: “Italian Defense minister announces troop withdrawal after Afghan elections”: http://news.xinhuanet.com/english/2009-10/28/content_12344552.htm

[3] MicroFinance Investment Support Facility for Afghanistan: http://www.misfa.org.af/index.php?page=en_Introduction

[4] The MIX Market: Afghanistan: http://www.mixmarket.org/mfi/country/Afghanistan

[5] WHO’S WHO IN MICROFINANCE: The Microfinance Investment Support Facility for Afghanistan (MISFA)

[6] Pajhwok Afghan News: “Italy to Disbase €6.4m to Afghan Microfinance Sector”: http://outlookafghanistan.net/news_Pages/Local%20news.html