Improved Access to Finance for Afghan Agribusinesses

Speeches Shim

Monday, July 15, 2019
Naweed Hadawal, an ADF representative, presenting financial alternatives to participants at the USAID Access to Finance workshop.
USAID/Afghanistan

Access to finance is a major challenge for agribusinesses and farmers in Afghanistan. The financial institutions in the country consider the sector risky due to the volatile security environment, lack of acceptable collateral, and lack of businesses’ capital. In addition, the level of financial literacy among businesses in Afghanistan is very low. Lack of information, limited loan offers, and heavy lending requirements have largely prevented agribusinesses from borrowing from financial institutions.

To address this challenge, USAID partnered with the Agriculture Development Fund (ADF), a financial institution established in 2010, to provide credit to small commercial farmers and agribusinesses. In June 2019, USAID and ADF conducted a joint one-day workshop in Kabul for 42 members of the national poultry and dairy associations to improve their financial literacy and business-to-bank linkages.

The workshop curriculum covered financial elements related to the business management cycle including financing, available financial products, loan requirements, business cycle, product pricing, investments, expenses, revenues, and debits and credits. ADF presented their services and fielded questions related to loans, analyzed the specific credit needs of individual participants and explained the loan application process.

The most acute obstacle for businesses identified was the absence of official title deed documents needed to establish collateral in the loan application process. Banks, on the other hand, require registered property collateral equal to 120 percent of the loan value. Only three of the 42 workshop participants were in possession of formal title deeds.

However, a solution to this issue emerged at the workshop; the option of third-party collateral to obtain credit. Consequently, eight participants expressed interest to apply for loans with combined value of $600,000.

USAID will assist these eight companies to prepare loan applications for submission to ADF and other financial institutions, thus opening doors for capital financing of agribusinesses in Afghanistan.

"The USAID Access to Finance Workshop enabled me to understand different types of credit available in Afghanistan. Most importantly, I heard for the first time that financial institutions are also accepting third-party collateral as security for a loan. I have never applied for a loan before, but now I will.” - Access to Finance Workshop participant