Microfinance In Afghanistan

Committee: The Economic and Financial Affairs Council

Topic: Microfinance

Country: Islamic State of Afghanistan

Delegate: Danilo Gleichmann, Oslo Montessori School

Microfinance is the supply of loans, savings and other basic financial services to the poor. The poor save all the time, although mostly in informal ways, such as gold, jewellery, domestic animals or building materials because they can easily be exchanged for cash. The poor cannot open bank accounts since they are not able to reach the minimum balance requirements. Many of them are desperate and tend to borrow money from loan sharks that has a very high interest rate, which creates an evil cycle of debt.

In the world, 50% of the world’s population

“Microfinance has proved its value, in many countries, as a weapon against poverty and hunger, it really can change peoples’ lives for the better, especially the lives of those who need it most. With access to microfinance, they can earn more, build up assets, and better protect themselves against unexpected setbacks and losses. They can move beyond day-to-day survival towards planning for the future. They can invest in better nutrition, housing, health, and education for their children. In short, they can break the vicious circle of poverty. If we are to reach the millennium development goals, that is exactly the kind of progress we need to make.” - General Kofi

Many clients have reported that after a series of loan cycles, their lives have improved. They have better access to health, education, housing/land, while others say they are able to save money. About 72 percent of the total clients surveyed reported improvement in their economic situation from the previous year. It was also reported that microfinance creates jobs, not only for borrowers, but also for those hired by them for their small businesses, 45% of all clients generated employment for others, in many cases family members. Women, who make up the majority of microfinance clients, also reported accessing health services more after becoming borrowers, obtaining immunization cards for children seeking medical advice when they fell ill. Another impact on women borrowers is the sense of pride arising from being self-sufficient economically, and from being able to provide better care for their families. Because of all these compelling reasons, many borrowers have faithfully repaid their loans to ensure continued access to the service in the future. Based on its current benefits and impact on Afghans, the microfinance program is expected to contribute to the national economic development of Afghanistan in the long-term. (Microfinance in Afghanistan: A baseline and initial impact study for MISFA, by IDS, September