World Bank Supports Afghanistan's Efforts to Boost Rural Employment, Incomes

March 9, 2010

WASHINGTON, March 09, 2010 ─ The World Bank today approved a $30 million IDA grant to support a new initiative by the Government of Afghanistan designed to boost employment and incomes for people living in rural areas of the country.

The Afghanistan Rural Enterprise Development Project (AREDP) will enhance participation of the rural poor in economic activities by providing business development services, improving their access to finance, and strengthening market linkages and value chains.

Around 75 percent 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. 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.

The project will support the establishment of 13,000 Savings Groups, 6,500 Enterprise Groups (EGs) and 1,300 Village and Savings Loan Associations. The EGs will help maximize the economic potential of rural entrepreneurs to improve market access, deliver technical knowledge, raise basic business skills and leverage economies of scale to increase the value of their sales. The project will also work with  around 750 Small and Medium Enterprises (SMEs) which are likely to be key drivers of rural employment.  It will support SMEs in building necessary skills, promoting market development and particularly encouraging business linkages  into the rural economy.

AREDP will be implemented under the overall leadership of Ministry of Rural Rehabilitation and Development (MRRD).  With the initial $87.3 million budget envelope, the program will initially rolled-out in seven provinces (Kapisa, Balkh, Nanagahar, Herat, Bamyan, Kandahar and Helmand). It will later be scaled-up, with additional funds, to all 34 provinces of the country. In addition to IDA’s $30 million grant, the UK’s Department for International Development (DFID) has pledged £12 million through the Afghanistan Reconstruction Trust Fund (ARTF) for the initial rollout. The Danish Government has also committed $2 million under a bilateral agreement.  The remaining funding requirements will be met through the ARTF.

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