Credit Guarantees

Credit guarantees stimulate lending by ACGF's PIs — thereby enhancing access to finance for MSMEs so that they can realize their full growth potential.

Credit guarantees have always been at the core of ACGF’s activities in Afghanistan. Through the provision of credit guarantees to PIs, ACGF is effectively de-risking lending operations and ultimately increasing PIs’ willingness and ability to lend to MSMEs. Enhancing access to affordable finance for MSMEs, on the other hand, fosters investment in the private sector of Afghanistan, ultimately contributing to employment and overall economic development.

Due to political developments in Afghanistan in 2021 and beyond, new guarantee issuance was suspended, while existing guarantees were being continuously administered through adjusted processes and procedures. Since then, ACGF actively engaged international donors and reached a financing agreement with the European Union, which paves the way for the issuance of new guarantees, among other activities.

ACGF’s credit guarantees alleviate the constraints that typically hinder MSME borrowers’ access to adequate financing such as:

Lack of sufficient collateral

Insufficient loan amounts to fully finance the business' needs

Insufficient loan maturities to match the repayment capacity of borrowers and investment cycles of borrower projects

Lack of borrower information

High transaction costs of MSME lending

Information asymmetries in financial markets (e.g. moral hazard and adverse selection)

Relatively high perceived lending risks on the side of financial institutions and therefore high lending rates

Photographer: Naveed Nawabi

Through its activities, ACGF contributes to the development of MSMEs and financial institutions as well as to the overall economic development of Afghanistan.

Micro, Small & Medium Enterprises:

Enhanced access to finance

Increased investment capacity

Improved cash flow due to demand-oriented loan sizes and conditions

Increased revenues and earnings

Enhanced ability to achieve organizational growth and to create employment

Partner Institutions:

Increased lending volume with a decreasing risk exposure

Enhanced outreach to new target groups

Financial services innovation

Increased customer satisfaction by the provision of demand-oriented products

Increased profit due to lower loan loss provisions and economies of scale


Increased private sector investment

Enhanced private sector development for the strengthening of trade, production and access to local and global markets

Increased local incomes

New employment opportunities for the local population

Countercyclical support to the private sector

These benefits make ACGF’s credit guarantees a valuable tool that is well-suited for the development of the financial sector in the challenging economic context of Afghanistan.

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