Direct support services to MSMEs
In 2021, ACGF took up the new line of operation, and for the first time directly approached the Afghan MSME market. Under two donor projects (funded by KfW and the World Bank/ Ministry of Finance), ACGF started implementing two large scale matching grants programs to support MSMEs that invest in economically/socially beneficial projects, especially for those affected by the COVID-19 pandemic.
Through the delivery of matching grants, ACGF intended to support MSMEs with fixed capital and working capital for COVID-19 adaptation and to strenghten the pipeline of bankable firms and demand for financial services in the country. The programs aimed at providing “additionality” during and after the economic crisis period by helping enterprises adapt to and recover from COVID-19 impacts, capture possible emerging growth opportunities by re-engaging with the market, retain their productive capabilities across sectors, invest in retrofitting their premises, retool their business models for product and process innovation, and repurpose local production to meet the domestic needs of critical material emergency supplies.
Matching grants were to be considered when financial markets are not accessible to enterprises due to high perceived lending risks, when businesses could not come up with sufficient equity share in a loan financed investment, and/or when a crisis such as the COVID-19 pandemic resulted in a sharp contraction of the financial market.
To contribute to its success and long-term impact on MSMEs, the implementation of the matching grants programs was to be supplemented by the provision of business development services.
As a result of the recent events in Afghanistan, all activities related to the Matching Grants programs were suspended for the time being. At the time of suspension, ACGF had
received a number of grant applications and was in the process of reviewing them. ACGF aims revitalizing part of its grant operations during the year 2022 to ensure proper financing for MSMEs heavily affected by the recent adverse circumstances.
Start-Up Support Services
During 2021, ACGF and KfW developed the concept for a project targeted towards facilitating and increasing access to finance for start-up businesses in Afghanistan, as well as enhancing their overall capacity to achieve long-term viability.
Aside of its traditional areas of operation (guarantees and technical assistance), the project envisaged the establishment of a Business Support Centre (BSC) in Kabul. The BSC aimed at supporting start-up entrepreneurs to develop and launch new businesses and that are competitive in the national and global economy by providing better practice business support and a quality infrastructure. To this end, a wide range of services were to be offered, including long-term development programs, co-working spaces, consulting services, networking events, etc.
With the evolution of events in August 2021, all related efforts were suspended for the time being. Considering the current framework conditions and immediate humanitarian response needs in Afghanistan, a revival of the efforts might be seen in the medium-term. While carefully monitoring all developments, ACGF is committed to providing support to Afghan MSMEs, considering necessary adjustments to the foreseen program to adapt to the new realities.