Source: Netherlands Development Finance Company (FMO).
Original press release available here.
THE HAGUE, February 27 – This week, the Netherlands Development Finance Company (FMO) entered the microfinance business in Afghanistan by signing an agreement with the First MicroFinanceBank Afghanistan (FMFB). Afghanistan is emerging from 25 years of war, and, until 2002, it had no functioning banking system at all. After the fall of the Taliban the banking sector had to start from scratch. FMO financing makes it possible for more entrepreneurs and small and medium sized enterprises (SMEs) to attract a loan in local currency. This is a very scarce product, but it is essential to develop the economy and help stabilize the country.
Increasing population
The Afghan microfinance sector is still in the very early stages of development, with only 20 percent of the market demand being met. As the population is increasing and refugees are returning the demand is expected to further increase. FMFB started activities in 2004 and is a majority-owned subsidiary of Aga Khan Agency for Microfinance (AKAM), with IFC and KfW participating as minority shareholders. AKAM is part of the Aga Khan Development Network (AKDN), which brings together a number of international development agencies, institutions and programs seeking to improve the living conditions of the poor. In 2007, FMFB had almost 24,000 outstanding loans; it has the largest microfinance portfolio in the country. FMFB is starting a housing finance pilot, which will improve and renovate existing housing for Afghans. The bank also intends to increase its lending to women, who currently account for 19% of the borrowers, and who often work as market vendors and small-scale producers.
Long term financing
FMFB employs 186 loan officers of which 45 are women. These loan officers service the microfinance clients, who are mostly situated in the urban areas of the northern half of the country. FMFB focuses on the poorer entrepreneurs in Afghanistan. In 2007, FMFB had a net loan portfolio of USD 25.9 million, as compared to a net loan portfolio of USD 16.9 million in 2006. FMO will provide FMFB with a long-term subordinated loan in local currency (equivalent of USD 3 million) and a senior loan worth USD 6 million in local currency. They can also use these loans in the future to start up their housing activities.
Guarantees
Different microfinance institutions (MFIs) have different loan procedures. Most loans are provided with minimal collateral and limited guarantees. Repayment is driven more by social cohesion and the desire of borrowers to take additional loans to expand their businesses. Last year, FMFB’s default rate was less than one percent, meaning that the vast majority of the lenders pay back their loans. FMFB also has some other products, such as money exchange services, domestic and international transfers and current account services. In 2006, the Consultative Group to Assist the Poor (CGAP) awarded FMFB with the Financial Transparency Award for achieving the highest standards of financial disclosure.
The Netherlands Development Finance Company (FMO) is the international development bank of the Netherlands. FMO invests risk capital in companies and financial institutions in developing countries. FMO’s investment portfolio is EUR 3.4 billion, making it is one of the largest bilateral development banks worldwide. Thanks in part to its relationship with the Dutch government, FMO is able to take risks which commercial financiers are not – or not yet – prepared to take. FMO’s mission: to create flourishing enterprises, which can serve as engines of sustainable growth in their countries.
Since its establishment in 2005, The Aga Khan Agency for Microfinance (AKAM) has brought together over 25 years of microfinance activities, programs and banks that were administered by sister agencies within the Aga Khan Development Network. The underlying objectives of the Agency are to reduce poverty, diminish the vulnerability of poor populations and alleviate economic and social exclusion. AKAM is a not-for-profit, non-denominational, international development agency created under Swiss law. Its headquarters are in Geneva, Switzerland. It is governed by an independent Board of Directors. The Chairman of the Board is His Highness the Aga Khan.
Similar Posts:
- MICROCAPITAL BRIEF: Sama Money Acquires Première Agence de MicroFinance, Entering Microcredit Market in Mali
- MICROCAPITAL BRIEF: Khan Bank Raises $10m in Bond Sale to Vision Microfinance Dual Return Fund to Support Women’s SMEs in Mongolia
- MICROCAPITAL BRIEF: Oxus Kyrgyzstan Borrowing $1.6m from Grameen Credit Agricole Foundation for Microfinance Lending
- MICROCAPITAL BRIEF: Grameen Credit Agricole Foundation Loans $760k to Microfinance Institution Oxus Tajikistan
- MICROCAPITAL BRIEF: Incofin Places $4.3m in Equity in Varashakti Housing Finance via India Progress Fund
