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Small Steps, Giant Strides
by Caitlin Liu
Dec 27 2007
Dec 27 2007
Microloans of a few hundred or a few thousand dollars are helping many people in Afghanistan to lift themselves out of poverty and to recover some semblance of a normal life.
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On a busy street in Kabul, near where satchel-carrying schoolchildren scamper to and fro, Fatima and her husband Hassan are behind their store window, beckoning customers inside.
Their tiny emporium of wall-to-wall shelves offer all kinds of books, from dense texts on arithmetic to colorful volumes on poetry. Business is brisk, says Fatima, 60. Before she and her 73-year-old husband opened their bookstore with the help of a $660 microloan, the couple scraped by on $4 a day. Now, their income has doubled.
"We were eating once or twice a day," says Fatima, whose loan from Ariana Financial Services, a microfinance agency, helped buy inventory for their shop. "Now we eat three times a day."
Since 2003, as Afghanistan staggered out of the rubble of decades of turmoil and war, microfinance agencies have distributed more than $300 million in loans to 350,000 people like Fatima to launch and grow their own small business. The wave of entrepreneurism flowering across the country is now lifting families out of poverty and rebuilding Afghanistan's economy, one storefront at a time.
"It creates a community of entrepreneurs and small businesses," says Stanford University economics professor John B. Taylor, who has visited Afghanistan as undersecretary of international affairs for the U.S. Treasury and considers microfinance one of the most effective tools for developing the country. "That's how you get an economy moving."
Usually run by non-profit groups, microfinance agencies offer loans to the poor without requiring collateral. They also provide other services, like savings accounts, to people not served by commercial banks. Though microfinance has been part of the developing world for decades, it gained worldwide attention when one of its pioneers, Muhammad Yunus and the organization he founded, Grameen Bank of Bangladesh, won the 2006 Nobel Peace Prize.
In Afghanistan, a soon-to-be-released study shows that microfinance has already created valuable economic and social benefits. Among people who received loans, 72 percent said their financial situation has improved, compared to 51 percent of non-recipients, according to the survey of 1,019 households commissioned by Microfinance Investment Support Facility for Afghanistan, a nonprofit network created by the World Bank.
The average microloan is less than $300, and interest rates range from 17 to 20 percent, according to Amjad Arbab, managing director of the microfinance network. Many borrowers, after repaying in full, return for more loans to expand their business. Only 3 percent are in default.
In addition to creating an estimated 500,000 new jobs, microloans are boosting labor productivity. Tailors are investing in sewing machines. Farmers are buying oxen for plows.
Their tiny emporium of wall-to-wall shelves offer all kinds of books, from dense texts on arithmetic to colorful volumes on poetry. Business is brisk, says Fatima, 60. Before she and her 73-year-old husband opened their bookstore with the help of a $660 microloan, the couple scraped by on $4 a day. Now, their income has doubled.
"We were eating once or twice a day," says Fatima, whose loan from Ariana Financial Services, a microfinance agency, helped buy inventory for their shop. "Now we eat three times a day."
Since 2003, as Afghanistan staggered out of the rubble of decades of turmoil and war, microfinance agencies have distributed more than $300 million in loans to 350,000 people like Fatima to launch and grow their own small business. The wave of entrepreneurism flowering across the country is now lifting families out of poverty and rebuilding Afghanistan's economy, one storefront at a time.
"It creates a community of entrepreneurs and small businesses," says Stanford University economics professor John B. Taylor, who has visited Afghanistan as undersecretary of international affairs for the U.S. Treasury and considers microfinance one of the most effective tools for developing the country. "That's how you get an economy moving."
Usually run by non-profit groups, microfinance agencies offer loans to the poor without requiring collateral. They also provide other services, like savings accounts, to people not served by commercial banks. Though microfinance has been part of the developing world for decades, it gained worldwide attention when one of its pioneers, Muhammad Yunus and the organization he founded, Grameen Bank of Bangladesh, won the 2006 Nobel Peace Prize.
In Afghanistan, a soon-to-be-released study shows that microfinance has already created valuable economic and social benefits. Among people who received loans, 72 percent said their financial situation has improved, compared to 51 percent of non-recipients, according to the survey of 1,019 households commissioned by Microfinance Investment Support Facility for Afghanistan, a nonprofit network created by the World Bank.
The average microloan is less than $300, and interest rates range from 17 to 20 percent, according to Amjad Arbab, managing director of the microfinance network. Many borrowers, after repaying in full, return for more loans to expand their business. Only 3 percent are in default.
In addition to creating an estimated 500,000 new jobs, microloans are boosting labor productivity. Tailors are investing in sewing machines. Farmers are buying oxen for plows.
Shops like Fatima's bookstore, opened in a neighborhood of schools, also signal hope in Afghanistan's future. Children now march off to class instead of running from war. Her student-customers now include girls as well as boys.
Under Taliban rule, girls were barred from schools and women could not work outside their home. But women now represent 70 percent of microfinance clients in the country.
Four out of five women reported an "improved attitude" among their husband and other relatives after they began using microcredit, according to the study, which recently circulated internally among the Afghanistan Ministry of Finance, the World Bank and the 15 microfinance agencies in the country. While just 18 percent of women in Afghanistan control their pursestrings, 46 percent of female microfinance clients say they enjoy total freedom over money they earn.
"Many are running their own businesses now," says Stephen F. Rasmussen, the World Bank project leader for microfinance in Afghanistan. "It provides women with more of a say about household expenses. It give them more power in the household. And now they feel they can participate in mainstream society."
Mastroa, a 45-year-old mother of eight who lives in the village of Pooza Ashlan, couldn't agree more.
She and some neighbors recently took out $500 loans from the Aga Khan Agency for Microfinance to buy cows. Now, the women travel to a city 15 miles away to sell milk and yogurt.
"Before the loan, we were housewives," Mastroa says."Now we are busy with the cow. Economically we are doing better and spiritually as well!"
Microfinance is not a cure for all of Afghanistan ills. Many people are still desperately poor and don't have access to safe drinking water. Only 28 percent of adults can read and write.
In some parts of the country, violence remains part of everyday life. Microbanks have been robbed, loan officers kidnapped. At least two have been murdered on the job.
But the nation pushes on.
"Afghans are very resilient. People have the sense they can move ahead," says Rasmussen of the World Bank. Microfinance "provides economic opportunity. It provides hope. It provides dignity You're not getting a handout. It's rebuilding lives, rebuilding the country."
Under Taliban rule, girls were barred from schools and women could not work outside their home. But women now represent 70 percent of microfinance clients in the country.
Four out of five women reported an "improved attitude" among their husband and other relatives after they began using microcredit, according to the study, which recently circulated internally among the Afghanistan Ministry of Finance, the World Bank and the 15 microfinance agencies in the country. While just 18 percent of women in Afghanistan control their pursestrings, 46 percent of female microfinance clients say they enjoy total freedom over money they earn.
"Many are running their own businesses now," says Stephen F. Rasmussen, the World Bank project leader for microfinance in Afghanistan. "It provides women with more of a say about household expenses. It give them more power in the household. And now they feel they can participate in mainstream society."
Mastroa, a 45-year-old mother of eight who lives in the village of Pooza Ashlan, couldn't agree more.
She and some neighbors recently took out $500 loans from the Aga Khan Agency for Microfinance to buy cows. Now, the women travel to a city 15 miles away to sell milk and yogurt.
"Before the loan, we were housewives," Mastroa says."Now we are busy with the cow. Economically we are doing better and spiritually as well!"
Microfinance is not a cure for all of Afghanistan ills. Many people are still desperately poor and don't have access to safe drinking water. Only 28 percent of adults can read and write.
In some parts of the country, violence remains part of everyday life. Microbanks have been robbed, loan officers kidnapped. At least two have been murdered on the job.
But the nation pushes on.
"Afghans are very resilient. People have the sense they can move ahead," says Rasmussen of the World Bank. Microfinance "provides economic opportunity. It provides hope. It provides dignity You're not getting a handout. It's rebuilding lives, rebuilding the country."
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