Microfinance and microbusiness hold a great deal of promise for the continued development of Afghanistan. Through microloans, Afghan people can start their own small businesses that, if successful, eventually generate jobs in their communities. One of the primary sources of microloans in Afghanistan is the First MicrofinanceBank (FMFB-A). This nonprofit organization grew out of the Aga Khan Development Network, a combination of nine development agencies that, among other activities, works toward rural and economic development in the Middle East, Asia, and Africa.
Founded in 2004, the First MicrofinanceBank has continued to expand its products to serve the needs of Afghanistan’s most vulnerable populations, offering solutions that are engineered to alleviate poverty while also speeding economic development. The bank has adopted a sustainable structure that uses revenues from its loan products to cover operational costs while investing any surpluses directly back into the bank to expand the types and number of microloans that it can offer.
The Small Business Loan
One of the flagship products of the microfinance organization, this loan provides applicants with funding between $200 and $5,000 for a minimum duration of six months. Working capital loans must be repaid within a calendar year, but the term extends to two years for loans used to purchase assets. To be eligible for this loan, entrepreneurs need to already have a business started with annual revenues that do not exceed $10,000. Individuals may use this loan to purchase stock, cover travel expenses, or make improvements to a shop if the applicant can show that his or her self-financing capacity can cover the cost of loan repayment.
Agriculture and Livestock Loans
The First MicrofinanceBank provides two variations of a loan for the purchase of agricultural products and livestock: one for seasonal purchases and another that includes a grace period. The seasonal loan product ranges from $100 to $4,000 and must be repaid within two years. Farmers can use the funding to purchase or breed livestock, as well as to buy medicines, vaccines, and feeds or expand farm activities related to livestock rearing. Individuals can choose between fixed monthly payments or seasonal repayments, which must included a minimum of three lump sums each year. Borrowers are eligible for repeat loans based on repayment history.
The grace-period product has a cap at $3,000 but includes a grace period ranging from zero to 11 months before repayment of the principal begins. The terms between loans designated for livestock and those for agricultural products vary slightly.
Group Loans
If individuals wishing to start or expand a farming initiative cannot qualify for a loan on their own, they may team with other members of the community to seek a group loan. For the first cycle of funding, the group must contain between four and six members. The maximum amount of the loan depends on the number of people in the group, with up to $1,000 per member. The loan term stretches up to two years and includes a grace period with similar regulations as the individual agriculture and livestock grace-period loan product.
Housing Improvement Loans
First MicrofinanceBank’s housing improvement loans allow people living in rural or urban areas to make repairs or upgrades to an owned dwelling. People may also use this loan to connect their home to basic services. The loan is capped at 40 percent of the appraised value of the home after completion of the project, but for the total borrowed amount is limited to $5,000. Also, the loan cannot exceed 70 percent of the estimated cost of the project. Borrowers must supply the rest of the cost through either cash or labor. Repayments must take place within two years through monthly payments.
Residents of rural areas have more flexibility in the terms of the loan. These individuals may use the loan to undertake structural changes or even complete a new home. Borrowers can also use the microloan to install solar energy and insulation. The loan is disbursed in two portions, with the second coming after demonstration of progress with the project. Repayment schedules may be fixed or seasonal.
Small and Medium Business Loans
First MicrofinanceBank also seeks to help entrepreneurs grow their businesses so that they can become more integral parts of the community and create additional jobs. These loans have a much higher limit at $100,000 with a minimum of $5,000. The bank takes into account the feasibility of proposed projects before approving loans.
People can apply for short-term loans, with terms ranging from six months to a year, or long-term loans, which can stretch up to three years. The long-term product is mostly geared toward fixed-asset investments, whereas the short-term loan can be applied much like small business loan.
Personal Loans
To help individuals seek education or cover other household or health expenses, First MicrofinanceBank offers personal loans valued between $500 and $5,000 with terms extending up to three years. To qualify for this product, individuals must have secure employment at a reputable company, and the monthly loan payment must not exceed 30 percent of the person’s monthly salary.