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 for access to finance

Credit guarantees have always been at the core of ACGF’s business. Credit guarantees cover a share of the default risk of loans provided by financial institutions to their borrowers. Through the extension of credit guarantees to PIs, ACGF aims at de-risking lending operations and ultimately increasing PIs’ willingness and ability to lend to MSMEs.

Technical assistance to expand capacities

TA activities are dedicated to strengthening the capacity of the PIs for more efficient and more accessible MSME lending. 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 facilitates the conversion to
Shariah-compliant lending.

Direct support services to MSMEs

Direct support services to MSMEs include grants provided by ACGF to MSMEs to support the sector by means of stimulating investment in times of crisis. Funded by the World Bank and KfW, ACGF started implementing a large-scale matching grants program in 2021 to enhance access to finance for MSMEs that invest in economically/socially beneficial projects, especially for those affected by the COVID-19 pandemic. Moreover, ACGF initiated the establishment of a start-up business incubator in Kabul. While the political developments in Afghanistan in 2021 caused these projects to be put on hold, ACGF has successfully engaged international donors to obtain new funding for direct support services to MSMEs. Equipped with invaluable experience from the groundwork for the Matching Grants program funded by World Bank and KfW, ACGF is once again preparing to provide direct support services to MSMEs.

Special focus areas

ACGF aims at providing inclusive solutions which address key development challenges and specific needs in the country. Some of its focus areas include Islamic finance, COVID-19, gender, agriculture finance, solar finance, and digitalization.

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