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FEATURE STORY

Reviving Rural Enterprise in Afghanistan

March 9, 2010

RURAL ENTERPRISE IS KEY

March 9, 2010 - Around 75% of Afghans live in rural areas where agriculture is the primary source of income. However, poor governance, inadequate marketing infrastructure and business development services, and poor post-harvest practices are limiting the economic development potential of the agriculture sector.

AGRICULTURE FOR GROWTH

In addition, lack of access to finance and business know-how is hampering the sector’s development and restricting on-farm and non-farm employment opportunities, thus perpetuating poverty in the rural areas. To boost employment and incomes for people living in rural areas of the country, the World Bank has recently approved a $30 million grant from the International Development Association to assist the newly established Afghanistan Rural Enterprise Development Program (AREDP), an initiative that is already benefitting farmers in Afghanistan.

Agha Shereen, a subsistence farmer in Abid Khail Village of Jabulsaraj, is part of the program. For years he had wanted to grow his small poultry business but lacked the technical knowledge and financial resources to properly expand. “I knew this was the opportunity I had waited for, so I immediately joined my village’s Enterprise Group,” Agha Shereen said. “We now have a producing poultry farm and I am contributing to the support of my family.”

WORLD BANK'S ROLE, WORKING WITH PARTNERS

AREDP is a national multi-donor funded, government-led program that jump-starts private sector growth in rural Afghanistan. In addition to IDA’s $30 million grant, the UK’s Department for International Development (DFID) has pledged $23 million through Afghanistan Reconstruction Trust Fund (ARTF). The Danish Government has also indicated they will support the program with a $2 million contribution under a bilateral agreement.

The program will support the establishment of 13,000 Savings Groups, 6,500 Enterprise Groups and 1,300 Village and Savings Loan Associations. AREDP will also support in building necessary skills, promoting market development and in particular, encouraging business linkages with the rural economy.

“The demand for the program came from rural men and women across Afghanistan. In Community Development Council meetings, they repeatedly called for a national initiative to tackle the twin problems of unemployment and poverty in rural areas,” said Ahmad Javaid Zeerak, AREDP Executive Director.

According to Qazi Azmat Isa, World Bank Project Team Leader, the pilot phase of this program demonstrated that such an intervention can have an enormous impact in terms of improving employment opportunities and income of rural men and women. “We have also seen in many other countries - in South Asia and beyond - that promoting synergies between private companies and rural enterprises provides a powerful force for boosting rural incomes,” he added.

THE PILOT PROGRAM

AREDP was launched after a pilot phase which included the completion of a socio-economic survey in 20 villages of Jabulsaraj district. Provincial and district governors, District Development Assemblies (DDAs) and Community Development Councils (CDCs) were surveyed, and overwhelmingly supported the development of the program.

To implement the program in each of the 20 targeted communities, two Village Facilitators – one female and one male - were identified. Subsequently, Saving Groups and Enterprise Groups were established. Saving Groups (SGs) are groups set up at the community level to receive training in financial services and start common savings and inter-lending activities. Enterprise Groups are established at the community level involving between five to fifteen members, formed around a common enterprise activity and usually not for the conduct of financial activities. During the first four months of the pilot phase, 265 SGs and 36 EGs were formed with more than half of the SG members being women.

“As a result of the training, the Village Facilitators and the Saving Groups are now able to keep an accurate record and manage their financial information much like a professional financial institution,” said Ahmad Wakil Hamidpour, provincial head of the program in Parwan Province. “This was a positive first step for the groups and they are now ready to conduct internal lending.”

AFGHAN OWNERSHIP

AREDP also provides basic technical and business support to the EGs and helps them to anticipate needs for future loans. To date, the EGs have only received technical assistance from the program in the fishing and poultry sectors.

Executive Director Zeerak commented, “Based on the impressive results to-date in Parwan, AREDP will be expanded to Balkh, Nangarhar, Herat, Bamyan, and Badakhshan Provinces with the support of the World Bank, and Kandahar, Helmand, Daikundi and Uruzgan through bi-lateral support.”

The program is managed by the Government of Afghanistan’s Ministry of Rural Rehabilitation and Development (MRRD). Upon meeting benchmarks, AREDP will be spun off into an independent entity with a Steering Board comprised of private and public sector representatives. AREDP is national in scope and will build on other developmental initiatives of the Government of Afghanistan, donors, and microfinance institutions in the area of private sector development.


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