MICROCAPITAL STORY: International Finance Corporation (IFC) Signs Agreement with First MicroFinanceBank Afghanistan (FMFB), Part of Aga Khan Development Network (AKDN), to Strengthen Capacity to Introduce Housing Microfinance

International Finance Corporation (IFC), a member of the World Bank Group, signed an agreement, for an undisclosed amount, with First MicroFinanceBank Afghanistan (FMFB), part of the Aga Khan Agency of Microfinance, a unit of Aga Khan Development Network (AKDN) to strengthen the bank’s capacity to introduce a product line that will address the housing needs of low- and middle-income Afghans. First MicroFinanceBank Afghanistan, established in 2003, was the first licensed microfinance bank in Afghanistan after the collapse of the Taliban regime. The company had USD 27.2 million in loans outstanding in 2007.

Under the terms of the agreement, the International Finance Corporation will recruit an advisor to work closely with First MicroFinanceBank Afghanistan to develop sound operational policies and guidelines necessary for building a sustainable housing portfolio. Muslim-ul-Haq, CEO of First MicroFinanceBank Afghanistan, said, “We are confident that with IFC’s technical assistance, we can offer products that help meet the housing needs of the majority of Afghans who currently do not have access to housing finance.” Syed Farhan Fasihuddin, IFC Manager for Housing Finance Advisory Services in Middle East and North Africa stated, “Our aim is to improve the living standards of people in Afghanistan’s economically challenged communities. We hope to build on our long-term relationship with the First MicroFinanceBank Afghanistan in our effort to achieve this objective.”

The agreement is a continuation of the relationship between the International Finance Corporation and First MicroFinanceBank Afghanistan. IFC helped establish First MicroFinance Bank Afghanistan in 2002, through an equity investment of USD 25 million. Recently, IFC extended a long-term loan of USD 4.5 million to support FMFB’s expansion activities in microfinance, housing finance, and lending to small and medium enterprises. For 2007, FMFB achieved a return on assets of 1.91 percent and a return on equity of 12.16 percent.

In 2007, IFC conducted a study of Afghanistan’s housing sector, in collaboration with the World Bank, and recommended expanding the availability of mortgages and microfinance loans for housing. To date, most microfinance institutions and banks in Afghanistan do not offer housing loans, and traditional housing finance is limited because the existing legal and regulatory infrastructure does not support mortgage lending.

The First Microfinance Bank of Afghanistan is a limited-liability company in Afghanistan. It is the country’s leading financial-services provider and part of the Aga Khan Agency of Microfinance, a unit of Aga Khan Development Network (AKDN). The bank’s main focus is to contribute to poverty alleviation and economic development by providing sustainable financial services that targets micro and small businesses and individual households. For a complete profile of AKDN, please see MicroCapital’s “Who’s Who in Microfinance” feature on this organization.

By Iyanna Holmes, Research Assistant

Additional Resources:

First Initiative: firstinitiative.org

IFC Press Release: IFC to Help First Microfinance Bank Offer Housing Loans in Afghanistan

IFC and World Bank to Help Provide Affordable Housing in Afghanistan

IFC.org: Summary of Project Information

Microcapital.org article, June 14, 2007: Who’s Who in Microfinance: Aga Khan Develpment Network (AKDN), Switzerland

The MIX Market profile for The First MicroFinanceBank – Afghanistan: http://www.mixmarket.org/en/demand/demand.show.profile.asp?ett=1560