Afghanistan: Small loans, big dreams

Apr 2007
Canada, April, 30 2007 - A microfinance agency run by an expatriate is helping Afghan women achieve financial stability.

Katrin Fakiri was eight years old when her family fled Afghanistan for the United States. Two decades later, she is one of thousands of ex-pats returning home to help rebuild a shattered economy -- one dollar at a time.

Ms. Fakiri is the managing director of Parwaz Microfinance Institution, a Canadian-backed, Kabul-based organization that gives $150 (U.S.) loans to women for businesses ranging from carpet weaving to bread baking.

The concept is sweeping through Afghanistan, with microfinance now reaching about 340,000 families across the country. Canada is the largest donor country to the sector, with a $40-million contribution to back various small-scale financial projects.

Yet hurdles linger in a country broken by years of conflict and war, where opium still accounts for one-third of the economy. Helping women become financially independent is a unique challenge.

Women are at times limited by security and cultural traditions here, so they can't go out into the market and sell items," Ms. Fakiri said. "They can't be a shopkeeper, as they could in India or some other Asian countries." Thus a husband or son tend to sell the products.

A typical loan may see a woman buy a cow and use the milk to make yogurt, which the male family member will sell on the streets or to a merchant.

That's not the only challenge. Parwaz -- which means "to rise" in the Dari language -- only serves female clients. So to stop men from feeling alienated, a male household member co-signs the loan.

Rural areas are also difficult. Parwaz has many clients in Kabul, but it also works in more conservative, rural areas where businesswomen don't have much mobility and consequently have a more limited market. It had to withdraw from the city of Ghazni amid Taliban threats that any woman caught working would be beheaded.

The thorniest issue is the concept of interest in an Islamic country. Interest is allowed in Islam, but only under certain conditions, and that doesn't mesh well with microcredit loans, Ms. Fakiri said. The solution? "We call it an application fee."

And while some still complain that her group is going against the tenets of Islam, "if it's helping us and helping us feed our families and putting us to work, then how can it be anti-Islamic?" she said.

Parwaz is four years old and serves more than 8,000 clients, with a 99-per-cent repayment rate. It aims to reach full financial sustainability by 2009. One requirement of the program is that women save the equivalent of $1 a month.

It is one of 15 microfinance organizations funded by Microfinance Support Facility for Afghanistan, a multinational facility whose biggest backer is the Canadian International Development Agency. It is only two years old, but active in 21 provinces in every region in the country. The group estimates the potential market for microfinance clients at up to five million people.

Mary Coyle, director of the Coady International Institute in Antigonish, Nova Scotia, sits on MISFA's board and recently returned from a visit to Afghanistan.

"It's an incredible success story in the context of Afghanistan, where there are tremendous security difficulties as well as the fact that you're building up a system from scratch," she said.

Bibi Qutbi is one woman she visited. She lives on the side of a hill that surrounds Kabul, in a house carved out from the rock face. Ms. Qutbi's husband is unemployed and her son is disabled. She is a tailor, who took out a $200 loan to import gold and silver thread from India.

She is now a certified provider of hand-embroidered badges for police and military. She has a steady market and is training several other women to join her. Proceeds from her business support her family and go toward medical treatment.

Stories like this could well help Afghanistan pick up the pieces.

"This is one of the poorest countries in the world. And the majority of people belong to the informal sector," Ms. Fakiri said. "Any vibrant economy is built on the backs of these small- or medium-sized businesses. So if we can support these microbusinesses, in a few years they can actually become small and eventually medium businesses. It will have huge impact on the economy."

The key question across the sector in Afghanistan is whether microfinance is having a long-term impact on the standard of living. While anecdotal evidence suggests "tremendous" success, Ms. Fakiri is working with the World Bank to establish formal measures.

"The one trend that we've seen in the past two or three years is that women have gained more confidence," she said. "If they've gained confidence, they can venture outside, they can purchase materials, they can go and make contracts with storeowners. . . . It affects all spheres of their life."

At least half of her clients report higher incomes and economic security after the loans. On a broader basis, the economy is being stimulated and thousands of jobs are being created, she added.


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