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
“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
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.