Lending a Hand and a Little Bit More


June 1, 2004

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    Businesswomen obtain much-needed loans at the Ariana Financial Services Group office in Kabul, Afghanistan. Photo: Cassandra Nelson/Mercy Corps Photo:

A long line of women extends down the staircase of the Ariana Financial Services Group (AFSG) office in Kabul. The women are eagerly waiting to collect their small business loans.

“I finished paying off my first loan, and am about to collect my second loan for 10,000 Afghani [about $200 USD],” says Maroofa. “The loans help me to buy goods for my family’s grocery store, so we can expand our inventory. Since I took the first loan, our sales have really improved because we can stock items that are expensive and have to be imported.”

In April 2003, Mercy Corps launched a microfinance program, Ariana Financial Services Group, in Afghanistan to assist small business owners and entrepreneurs increase their incomes, expand their businesses and improve their quality of life.

“By extending small loans of $50 to $500, Mercy Corps is able to change the lives of many poor Afghans, who are struggling to make ends meet on a daily basis with their small businesses,” says Tom Shaw, Mercy Corps’ Microfinance Program Director in Kabul. “These micro-loans are meant to help the loan recipients take their business to the next level and allow them to enjoy a greater percentage of the income from their work.”

Many small or cottage businesses are forced to rent equipment, sell products through a middleman, or rely on advances to purchase materials for products. These types of arrangements usually result in the business person losing up to 50% of the income that might have otherwise been part of their profit. Thus, the cycle continues since they have no way to get finance that will take their business to the next level, when so much of their potential income goes to the middlemen.

Mercy Corps’ microfinance program was started with an initial grant from the Bill and Melinda Gates Foundation and private funds from Mercy Corps. Early operations were focused exclusively on women in District 7 of Kabul, the area hardest hit by fighting during the war. According to Shaw, Mercy Corps was one of the first organizations to begin lending to entrepreneurs in Kabul City.

The program, now being funded by the Micro-Finance Investment and Support Facility for Afghanistan (MISFA), which is overseen by Ministry of Rural Rehabilitation and Development and the World Bank, has grown over the past year to include female and male business owners and covers all 18 districts in Kabul. The total current loan fund is $515,000, with a possibility for an additional $500,000 in late 2004 through MISFA.

“From these loans, we have seen clients open their own shops, purchase generators allowing them to work when the Kabul electricity is out, and purchase equipment and materials to expand their businesses and product lines,” says Amina Basir, a senior loan officer with AFSG. “In just a short time, I have seen many of our loan recipients’ move away from a day-to-day existence to a more stable financial position, for both their businesses and their families.”

Mercy Corps’ AFSG has extended over 3,150 loans to date (worth almost half a million dollars USD). Over 1/3 of loan recipients are female and AFSG is continuing to focus on marketing the service specifically to women. In addition, AFSG is looking to create new products for its clients, such as savings accounts and agricultural focused loans. The introduction of these new products should have a dramatic effect on both increasing lending to women and lowering risk, by using savings as a form of group guarantee.

Mercy Corps’ AFSG has extended loans to many traditional businesses, as well as some rather unexpected business ideas.