Our Work

Tackling key challenges for access to finance for micro, small and medium-sized enterprises (MSMEs) in Afghanistan

MSMEs are integral to the economy in Afghanistan. According to the MoIC, SMEs account for over 80% businesses in the country and are a vital driver of employment in urban and rural areas. Yet despite their importance to the Afghan economy, less than 5% of SMEs funding in Afghanistan comes from formal financial institutions. Small businesses instead tend to rely on informal sources of funding which are often insufficient for their needs, or they do not receive funding at all. As financial and government institutions, and other industry stakeholders work to expand economic opportunities and development in Afghanistan, MSMEs financing will be a key instrument for improving the economy.

“An estimated 50-70% of SMEs in emerging markets (and even higher in Afghanistan) are either not funded or underfunded by the formal financial sector.”
World Bank. "Improving Access to Finance for SMEs | Opportunities through Credit Reporting, Secured Lending and Insolvency Practices." Washington D.C., 2018.

By enhancing access to finance, ACGF’s interventions help Afghan businesses and financial institutions to prosper. In all its interventions, ACGF focuses on sustainable benefits that persist through the medium and long term, to achieve a real transformation of financial service delivery to MSMEs in Afghanistan.

Browse ACGF’s main areas of work below. 

Credit Guarantees, Unlocking Financing & Empowering Entrepreneurs  

Credit guarantees have always been at the core of ACGF’s line of work. They cover a share of the default risk of financing provided by financial institutions to their borrowers. Through the extension of credit guarantees to PIs, ACGF aims to de-risk lending operations and ultimately increase PIs’ willingness and ability to lend to MSMEs. Since 2018, ACGF has provided Sharia-compliant financing guarantees, and following 2021, ACGF fully transitioned to offering exclusively Sharia-compliant guarantees. ACGF is also open to adapting its existing guarantee structures to novel financing products currently being developed by the PIs.

Technical Assistance to Strengthen MSME Lending

Technical assistance (TA) activities are dedicated to strengthening the capacity of PIs for more efficient and more accessible MSME lending. Funded by its donors (currently the European Union and the World Bank), ACGF’s comprehensive TA programs are tailored to individual PIs taking into account their institutional strengths and weaknesses. Through ACGF’s TA , the PIs established MSME credit departments, introduced best practice lending policies and trained their staff on various hierarchical levels. Furthermore, ACGF supports the development of credit products, improves credit risk management and supports its PIs in adjusting their business models to Sharia-compliant financing.

Direct support services to MSMEs

Direct support services to MSMEs include grants provided by ACGF to MSMEs to support the sector by stimulating investment in times of crisis. Funded by the European Union, ACGF provides matching grants (MG) and market education through Islamic Finance workshops to help MSMEs improve their access to finance. The support services are targeting Afghan MSMEs with a special focus on strategic target groups, including female-headed, youth-headed, and rural MSMEs.

Key Strategic Areas

ACGF aims at providing inclusive solutions which address key development challenges and specific needs in the country. ACGF strategic areas include but are not limited to Islamic finance, access to finance for women, and agriculture finance.

Scroll to Top