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IFC Makes First Investment in Afghanistan’s Financial Sector


Georg Schmidt
Phone: +1 (202) 458 2934
Email :
Gschmidt@ifc.org


Washington, January 16, 2004 - The International Finance Corporation (IFC), the private sector arm of the World Bank Group, has signed an agreement with the Aga Khan Fund for Economic Development SA (AKFED) to invest in The First MicroFinanceBank of Afghanistan (FMFB-A). FMFB-A, which was recently incorporated as the first full-service financial institution under the laws of Afghanistan, will provide credit and savings products to micro and small businesses. The agreement marks IFC’s first investment in Afghanistan since 1973.

FMFB-A will offer financial services at competitive rates, which will help remove financing constraints for micro and small enterprises. Currently, entrepreneurs still depend on scarce resources from family and friends, limited supplier financing or loans from money-lenders at prohibitive costs.


FMFB-A plans to establish itself in Kabul and the Northeastern provinces, initially serving urban micro and small businesses. It will then expand to gain national coverage, reaching out from its regional hubs to semi-urban and rural areas. AKFED is the majority shareholder in FMFB-A. IFC will hold shares of up to 19 percent. Germany’s development bank Kreditanstalt fuer Wiederaufbau (KfW) is also considering a participation in the capital of FMFB-A on behalf of the German government.


FMFB-A has already begun receiving some of the donor support that will be necessary to overcome such challenges as security, the need for wider gender outreach, inadequate infrastructure, and the extensive requirements for capacity building and training of professionals in the microfinance sector. Technical assistance has been contributed through the World Bank Group-administered Norwegian Trust Fund for Private Sector and Infrastructure, the Japanese Social Development Fund, the IFC-administered Dutch Trust Fund and IFC’s own resources. In addition, USAID is also providing grant-based technical assistance.


“We are really pleased to be part of this joint effort to create the very first microfinance bank in Afghanistan,” said Declan Duff, IFC’s director of Global Financial Markets. “The investment responds to the needs of the current and future backbone of Afghanistan’s economy, the small entrepreneurs who make a living for their families and rebuild the country to be their future home of peace and prosperity.”


Sami Haddad, IFC’s regional director for Middle East and North Africa added, “We want to encourage the growth of strong private sector enterprises in Afghanistan. Investing in local financial intermediaries is critical to achieve this aim. IFC will help jump-start the financial sector in Afghanistan, and introduce international best practice in corporate governance, anti-money laundering and gender outreach."


AKFED Director Iain Cheyne said, “We are committed to helping reduce poverty in Afghanistan. In this project, we expect to build upon and expand greatly our engagement in the country’s microfinance sector, through which we have been supporting the return of Afghan refugees and the resumption of economic activities in urban and rural areas. Our experience with similar projects in the region, and in several other countries will help us establish a sustainable and high-impact institution that responds well to the needs of the Afghan people, creating employment opportunities and helping alleviate social inequities.”


AKFED, the commercial arm of the Aga Khan Development Network (AKDN), helps build economically viable enterprises through long-term equity participation combined with professional management, technical expertise and support. Its sustainable investments in industry, tourism, and financial services projects play an important catalytic role in mobilizing foreign institutional investors, especially in Asia. AKFED will bring to FMFB-A its broad expertise in commercial as well as development banking operations. AKFED is currently the lead shareholder in five banks in emerging markets, while AKDN has approximately 40 microfinance banks and programs in countries of Central and South Asia, the Middle East and Africa.


IFC has worked with AKFED in over 20 projects in Africa as well as Central and South Asia and values it as a strong and committed partner. Most recently, IFC invested alongside AKFED in The First MicroFinanceBank of Pakistan.


The mission of IFC is to promote sustainable private sector investment in developing countries, helping to reduce poverty and improve people's lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, helps clients improve social and environmental sustainability, and provides technical assistance and advice to governments and businesses. From its founding in 1956 through FY03, IFC has committed more than $37 billion of its own funds and arranged $22 billion in syndications for 2,990 companies in 140 developing countries. IFC's worldwide committed portfolio as of FY03 was $16.8 billion for its own account and $6.6 billion held for participants in loan syndications.