Re-investigating Microfinance and Poverty Alleviation

Micro finance has had a rising trend since 2001 in Afghanistan, reaching its peak in 2008 with  372677 active borrowers (MISFA, 2010). This figure stood at 10,000 in 2001 (Maliha Hamid Hassan, 2009). Today, the sector covers provincial centers and 80 districts in 14 provinces and is being administered by the Microfinance Investment Support Agency via four partners, i.e. FMFB, FINCA, MUTAHID and OXUS. Of the 128,000 active borrowers, 27613 of them are rural habitants. Women constitute 28.9% of cumulative active borrowers (MISFA, 2018).

      Much research has been conducted on effectiveness of micro-finance in poverty alleviation, increase in income and assets holding, employment generation and skills improvement in Bangladesh, India and Pakistan. Pallavi Chaven and R Ramakumar, as an example, compares evidence from India and some other developing countries, in a research that was published in Political and economic weekly, in 2002 (Microfinance and Poverty in Rural Areas). Their findings indicate that microfinance has been able to bring “marginal improvement in beneficiaries income”. In Bangladesh, however, they write that the approach of repaying Grameen Bank’s loans using fresh loans obtained from moneylenders has created a vicious circle of poverty.
In Afghanistan, only a few researches have been done in this area:

1.     “Microfinance in Postwar Afghanistan: Towards a Conflict Sensitive Approach”, 2006, Michael David Harvey, Massey University. This research is based on 4 case studies in Kabul and Bamyan. The case studies include interviews with officials of various financial institutes, Afghanistan Independent Human Rights Commission, the UN and 50 interviews with clients of 4 microfinance institutions. The researcher has sought to investigate impact of microcredit on poverty alleviation and in peace-building. The research, however compares a control group that comprises of 11 non-clients with a treatment group comprising 39 clients.

2.     “Microfinance in Afghanistan: Baseline and Initial Impact Study for MISFA”, 2007, Martin Greeley, Mohit Chaturvedi. This study was commissioned by the World Bank and covered 5 zones. In total primary information was collected, via structured interviews, from 1019 households—616 clients, 304 non-clients, 99 dropouts.

3.     “From Access to Impact: Microcredit and  Rural Livelihoods in Afghanistan”, 2009, Paula Kantor, AREU. This research is based on evidence collected via semi-structured interviews, focused group discussions and key informant interviews in 3 villages in Balkh, Bamyan and Kabul, targeting 24 households.
        Most recent credible research, as such, dates back to 2007. Much has changed in this 11 years. The number of active borrowers has declined from 314000 in 2007 to 128000 in March 2018. Moreover, percentage of population below poverty line has increased from 36% in 2007 to 55% in 2016-2017.

       While billions of Afghanis (AFN 10 billion in 2016) is being spent in this area, it is not only necessary but is also relevant, as a result, to re-investigate whether or not micro-credit can address poverty in Afghanistan.


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