KABUL, Afghanistan — Plump and jovial, with a grin running ear to ear, 35-year-old Nasreem operates a successful carpet weaving and embroidery business with the help of her two daughters.
The Kabul family is of moderate means. Her husband Korban works as a government security officer. They were spared the harsh years in Afghanistan under Taliban rule, having fled to Pakistan where she worked as a carpet weaver in Peshawar.
Upon their return to Afghanistan after the fall of the Taliban, she once again began working for others until she learned of MISFA – the Microfinance Investment Support Facility for Afghanistan, and its partner agencies that are making small-business loans available to the country’s poorest entrepreneurs.
“I went there and talked to the manager of the organization and said I have skills of making carpets and embroidery and I need money to become an independent business woman,” she said through a translator at her cosy workshop in the village of Shahrakay Sabz, on the outskirts of the Afghan capital.
After receiving an initial 30,000 afghanis, or $700 Cdn, she was able to buy clothes, needles and other materials to get started. A friend with contacts at Bagram Airbase, a major U.S. military facility outside Kabul, has since helped secure a steady client base of foreign soldiers who often seek custom designs.
She has now received two more loans of 45,000 ($1,050) and 90,000 ($2,100) afghanis which has helped her hire a staff of about 20 women.
At 9:30 a.m., after they’ve completed their own household chores, the women begin streaming into the workshop.
They come six days a week for about eight hours to do embroidery, make carpets and other handicrafts. While their monthly wages peak at about 1,000 afghanis, or just under $25, most say they enjoy the opportunity to socialize and get out of the house.
The pocket change also helps cover the cost of personal items or the odd surprise expense like school supplies, said Laila, one of the older workers whose husband is a labourer struggling to support their six children.
“It’s a great skill but it doesn’t pay that well,” she said. “It’s good to keep busy and pass the time.”
Nasreem won’t discuss her profit margin in front of her staff, but she admits she’s successful, that her husband is happy because her work has not taken her far from home and that she is pleased to be able to help others in the process.
“It’s a great honour for me and I really feel happy that I’m helping these women,” she said. “At least I provide them some money.”
According to MISFA, the microfinance sector in Afghanistan has grown exponentially since 2002 when just a few providers were offering small-business loans to about 12,000 Afghans.
MISFA was created a year later by the Afghan government and registered as a limited liability non-profit company to oversee the microfinance sector and pool funding from international donors so it could be fairly distributed to the partner institutions that deliver the services.
Within five years, the sector grew from three microfinance institutions to 15 serving nearly half a million people with small-and medium-sized enterprises in 23 of the country’s 34 provinces including restive Kandahar, where the bulk of Canada’s military and development activity is centred.
About 70 per cent of microfinance clients are women and 40 per cent live in rural areas. The Canadian International Development Agency has remained MISFA’s top donor with a total contribution of more than $96 million since 2003.
A baseline impact study conducted last fall found there were 3,782 widows receiving small-business loans as well as 92 disabled clients.
It’s estimated that every client generates 1.5 employment opportunities which translates to some 500,000 spin-off jobs.
“The challenge in many developing countries is that the banking system is not yet developed to serve the poor or small-scale enterprises because of the perception of (the) poor (being a) credit risk,” said George Saibel, CIDA’s head of aid.
“The reality of microcredit operations, particularly those aimed at women, is quickly debunking this perception and contributing to banking sector reforms which are connecting the poor to more formal commercial and banking possibilities.”
A review of the microfinance sector conducted two years ago, however, suggested providers are not necessarily reaching the poorest of the poor. The report said lending institutions tend to approve applications primarily on the individual’s “ability to pay” rather than their “relative vulnerability.”
According to the report, while providers “implicitly strive to make social impacts,” they don’t explicitly target the most vulnerable households.
While banks and credit unions are among MISFA’s partner agencies, managing director Katrin Fakiri said most of them are non-profit groups that reach out to marginalized populations like women, widows and orphans. That said, Fakiri said MISFA has recently taken measures to ensure partner agencies don’t “lose sight of the double-bottom line.”
Products are designed to appeal to the poor and it’s estimated that three-quarters of clients are at or below the poverty line, she said.
Building Afghanistan’s microfinance sector is not without challenges.
Because of the sector’s “remarkable growth,” the “professionalization” of the partner agencies is not yet up to international standards, she said.
There have been concerns over their long-term sustainability, essentially their ability to move away from donor-funded lending to more commercial sources of funding so that when “donor fatigue” sets in, the sector can continue functioning.
But MISFA’s operations director Dale Lampe said even that’s changing. Three institutions are already 100 per cent self-sustainable and a fourth is expected to be by the end of the year.
On the security side, Fakiri said the insurgency has often prevented microfinance institutions from “rolling out their services and expanding outreach to underserviced populations in volatile regions.”
It’s why the volatile south accounts for just three per cent of the microfinance sector countrywide.
The only institution operating in all of Kandahar is BRAC, or Bangladesh Rural Advancement Committee. Regional manager Mahiuddin Azad said it began providing small-business loans about a year and a half ago.
Now more than 60 male shopkeepers are receiving anywhere from 50,000-500,000 afghanis ($1,170-$11,700) to improve their existing businesses under BRAC’s small-enterprise program.
About 90 women are receiving more modest loans worth 20,000-30,000 afghanis ($470-$700) as part of its microfinance program for tailoring, handicrafts, farming and animal husbandry-type enterprises.
“Security is the big problem,” Azad said, noting all the clients are in Kandahar city because the rest of the province isn’t safe enough. “We can’t come down here all the time to deliver the program. Often we deal with things over the phone from Kabul.”
Because of security and the strict religious customs many in the south adhere to, female participants must be married in order to facilitate collections as men are not supposed to interact with women who are not their relatives.
BRAC has also encountered problems with some shopkeepers and local religious leaders because charging interest goes against Islamic law, area manager Rafiqul Islam said.
Other times, men have expressed outrage at the idea of operating a program for female business owners, Azad added.
But assistant area manager Zabiullah Tokhi said BRAC has managed to keep proper tabs on clients and report just one case in which a woman misappropriated funds, spending the cash on herself rather than her business.
Fakiri insisted measures are in place to ensure microfinance funds aren’t being funnelled into illegal activities like the lucrative opium and marijuana industries, or the insurgency, and that such problems haven’t come up.
Loan officers regularly monitor their clients, and group lending programs encourage clients to monitor one another’s activities as indiscretions could affect the entire group, she said.