FINCA Afghanistan
Encyclopedia
FINCA Afghanistan is a nonprofit microfinance
organization and an affiliate of FINCA International
. Its headquarters is based in Kabul
, Afghanistan
.
on February 24, 2004. By the end of its first year in operation, the organization had reached over 4,500 clients, an outstanding loan portfolio
of almost $700,000, and a repayment rate of 100%.
The rapid expansion achieved in less than a year was the first evidence of the pent-up demand for financial services and economic opportunity among Afghanistan’s poor. Recognizing that these needs were not limited to Herat, FINCA initiated an ambitious long-term expansion plan to spread across Afghanistan, beginning with Kabul and Nangarhar in 2005, followed by Balkh
, Laghman
, Kunar
and Parwan in 2006, and Kunduz
in 2007. In each of these provinces, FINCA has established branch and market offices in the provincial capital, as well as outlying cities and districts.
Currently, FINCA Afghanistan has a total of over 33,289 clients and $4,403,106 in outstanding loans. Almost 10,000 of these clients are women. Other groups targeted in the program include ethnic minorities, returning refugees, orphans, and young former combatants.
principles. Since its inception, FINCA Afghanistan has offered a line of sharia
-compliant microfinance products, developed after careful vetting with local religious leaders, and confirmed through a fatwa
acquired from Al-Azhar University
in Cairo
, Egypt
(the world’s most respected Islamic institution of higher learning). Its current line of Murabaha
loan products is based on an agreement where the seller (i.e. FINCA) expressly mentions the cost he has incurred on the commodities to be sold and sells it to another person (the client) by adding a markup on the original cost, which is known to the buyer. It is one of the most popular modes of exchange used by banks in Islamic countries to promote interest-free transactions (interest being forbidden by sharia law). Aside from being Afghanistan’s first sharia-compliant microfinance organization, FINCA can perhaps claim to have created one of the world’s first Murabaha group-lending products.
A testament to FINCA’s culture of development is the decentralized nature of its regional and branch offices, where operations are administered exclusively on the strength of well-trained local senior and middle managers. Each regional office is managed by a regional branch manager, who administers the regional credit, finance, and HR employees. The program’s technical and training support are provided by FINCA’s headquarters in Kabul, through a specialized team of seven expatriates and a highly talented core of local finance, HR, IT and credit professionals.
Paralleling FINCA’s commitment to staff development is its dedication to promoting client businesses. As clients take advantage of FINCA’s products and services to develop their business capacities, they naturally progress to higher loan demands. To match their growing business needs, FINCA scales up its loan amounts as successful clients pass through successive loan cycles. For its most successful clients, FINCA has developed an individual loan product, as a graduating product for those who “outgrow” the smaller-sized group loans.
FINCA Afghanistan receives its primary funding from the Microfinance Investment Support Facility for Afghanistan (MISFA
) through a $30 million grant. In November 2006, this grant was augmented by $10 million through the United States Agency for International Development (USAID) as part of an $80 million rural microfinance project to promote development and stability in Afghanistan. The project, the Agriculture, Rural Investment and Enterprise Strengthening (ARIES) Program, will also complement USAID's existing Alternative Livelihoods Program
and will help establish a market-based, wholesale Rural Investment Fund to provide financing to cooperative
s, farmers' associations, and small and midsize enterprises throughout the country, in a push to eradicate the cultivation of opium poppies
.
FINCA Afghanistan is also a board member of the Afghanistan Mircrofinance Association (AMA).
Microfinance
Microfinance is the provision of financial services to low-income clients or solidarity lending groups including consumers and the self-employed, who traditionally lack access to banking and related services....
organization and an affiliate of FINCA International
FINCA International
The Foundation for International Community Assistance is a non-profit, microfinance organization, founded by John Hatch in 1984. Sometimes referred to as the "World Bank for the Poor" and a "poverty vaccine for the planet", FINCA is the innovator of the village banking methodology in microcredit...
. Its headquarters is based in Kabul
Kabul
Kabul , spelt Caubul in some classic literatures, is the capital and largest city of Afghanistan. It is also the capital of the Kabul Province, located in the eastern section of Afghanistan...
, Afghanistan
Afghanistan
Afghanistan , officially the Islamic Republic of Afghanistan, is a landlocked country located in the centre of Asia, forming South Asia, Central Asia and the Middle East. With a population of about 29 million, it has an area of , making it the 42nd most populous and 41st largest nation in the world...
.
Background and history
FINCA Afghanistan was founded on August 1, 2003 through grants and loans supplied by several donors and funding agencies. Her Majesty Queen Rania of Jordan announced the launching of the program in 2002. FINCA Afghanistan began lending operations in the city of HeratHerat
Herāt is the capital of Herat province in Afghanistan. It is the third largest city of Afghanistan, with a population of about 397,456 as of 2006. It is situated in the valley of the Hari River, which flows from the mountains of central Afghanistan to the Karakum Desert in Turkmenistan...
on February 24, 2004. By the end of its first year in operation, the organization had reached over 4,500 clients, an outstanding loan portfolio
Portfolio (finance)
Portfolio is a financial term denoting a collection of investments held by an investment company, hedge fund, financial institution or individual.-Definition:The term portfolio refers to any collection of financial assets such as stocks, bonds and cash...
of almost $700,000, and a repayment rate of 100%.
The rapid expansion achieved in less than a year was the first evidence of the pent-up demand for financial services and economic opportunity among Afghanistan’s poor. Recognizing that these needs were not limited to Herat, FINCA initiated an ambitious long-term expansion plan to spread across Afghanistan, beginning with Kabul and Nangarhar in 2005, followed by Balkh
Balkh
Balkh , was an ancient city and centre of Zoroastrianism in what is now northern Afghanistan. Today it is a small town in the province of Balkh, about 20 kilometers northwest of the provincial capital, Mazar-e Sharif, and some south of the Amu Darya. It was one of the major cities of Khorasan...
, Laghman
Laghman
Laghman can refer to:* Laghman Province in Afghanistan* Laghman, a place in Jowzjan Province, Afghanistan* Lamian and variants thereof as soup...
, Kunar
Kunar
Kunar may refer to:*Kunar Valley, Afghanistan and Pakistan*Kunar Province, Afghanistan*Kunar River, Afghanistan and Pakistan...
and Parwan in 2006, and Kunduz
Kunduz
Kunduz also known as Kundûz, Qonduz, Qondûz, Konduz, Kondûz, Kondoz, or Qhunduz is a city in northern Afghanistan, the capital of Kunduz Province. It is linked by highways with Mazari Sharif to the west, Kabul to the south and Tajikistan's border to the north...
in 2007. In each of these provinces, FINCA has established branch and market offices in the provincial capital, as well as outlying cities and districts.
Currently, FINCA Afghanistan has a total of over 33,289 clients and $4,403,106 in outstanding loans. Almost 10,000 of these clients are women. Other groups targeted in the program include ethnic minorities, returning refugees, orphans, and young former combatants.
FINCA Afghanistan's Islamic banking products
One of the major elements of FINCA’s success in Afghanistan has been its deference towards Islamic bankingIslamic banking
Islamic banking is banking or banking activity that is consistent with the principles of Islamic law and its practical application through the development of Islamic economics. Sharia prohibits the fixed or floating payment or acceptance of specific interest or fees for loans of money...
principles. Since its inception, FINCA Afghanistan has offered a line of sharia
Sharia
Sharia law, is the moral code and religious law of Islam. Sharia is derived from two primary sources of Islamic law: the precepts set forth in the Quran, and the example set by the Islamic prophet Muhammad in the Sunnah. Fiqh jurisprudence interprets and extends the application of sharia to...
-compliant microfinance products, developed after careful vetting with local religious leaders, and confirmed through a fatwa
Fatwa
A fatwā in the Islamic faith is a juristic ruling concerning Islamic law issued by an Islamic scholar. In Sunni Islam any fatwā is non-binding, whereas in Shia Islam it could be considered by an individual as binding, depending on his or her relation to the scholar. The person who issues a fatwā...
acquired from Al-Azhar University
Al-Azhar University
Al-Azhar University is an educational institute in Cairo, Egypt. Founded in 970~972 as a madrasa, it is the chief centre of Arabic literature and Islamic learning in the world. It is the oldest degree-granting university in Egypt. In 1961 non-religious subjects were added to its curriculum.It is...
in Cairo
Cairo
Cairo , is the capital of Egypt and the largest city in the Arab world and Africa, and the 16th largest metropolitan area in the world. Nicknamed "The City of a Thousand Minarets" for its preponderance of Islamic architecture, Cairo has long been a centre of the region's political and cultural life...
, Egypt
Egypt
Egypt , officially the Arab Republic of Egypt, Arabic: , is a country mainly in North Africa, with the Sinai Peninsula forming a land bridge in Southwest Asia. Egypt is thus a transcontinental country, and a major power in Africa, the Mediterranean Basin, the Middle East and the Muslim world...
(the world’s most respected Islamic institution of higher learning). Its current line of Murabaha
Murabaha
Murabahah or murabaha is a particular kind of sale, compliant with shariah, where the seller expressly mentions the cost he has incurred on the commodities for sale and sells it to another person by adding some profit or mark-up thereon which is known to the buyer...
loan products is based on an agreement where the seller (i.e. FINCA) expressly mentions the cost he has incurred on the commodities to be sold and sells it to another person (the client) by adding a markup on the original cost, which is known to the buyer. It is one of the most popular modes of exchange used by banks in Islamic countries to promote interest-free transactions (interest being forbidden by sharia law). Aside from being Afghanistan’s first sharia-compliant microfinance organization, FINCA can perhaps claim to have created one of the world’s first Murabaha group-lending products.
Staff and client empowerment
As a driving principle of its mission in Afghanistan, FINCA has been committed to the capacity-building and training of its ever-swelling ranks of employees, which now number over 400 nationwide. Encouraged by the positive response from staff members to its weekly in-house training sessions, FINCA management established the FINCA Afghanistan Microfinance Academy (FAMA), in 2006, developed on the premise that “just as FINCA brings the bank to the people, FAMA brings training to the branches”. This is accomplished via centralized planning and curriculum development, and implemented through training of trainers (ToT) with follow-ups by training managers. In a short span of time, FAMA has developed and is implementing a range of certification programs on a variety of subjects, including credit, finance, HR, and management. By the end of 2006 FAMA had certified over 60 trainers in ToT and over 200 local staff in village bank methodology.A testament to FINCA’s culture of development is the decentralized nature of its regional and branch offices, where operations are administered exclusively on the strength of well-trained local senior and middle managers. Each regional office is managed by a regional branch manager, who administers the regional credit, finance, and HR employees. The program’s technical and training support are provided by FINCA’s headquarters in Kabul, through a specialized team of seven expatriates and a highly talented core of local finance, HR, IT and credit professionals.
Paralleling FINCA’s commitment to staff development is its dedication to promoting client businesses. As clients take advantage of FINCA’s products and services to develop their business capacities, they naturally progress to higher loan demands. To match their growing business needs, FINCA scales up its loan amounts as successful clients pass through successive loan cycles. For its most successful clients, FINCA has developed an individual loan product, as a graduating product for those who “outgrow” the smaller-sized group loans.
Funding and partnerships
FINCA Afghanistan is connected to a vast worldwide network of FINCA affiliates. Knowledge sharing between subsidiaries and the use of a common operating system reduces the high transaction costs of small loans and achieves economies of scale. Moreover, FINCA is able to consolidate the assets of the subsidiaries and secure international lines of credit by leveraging the value of its entire network.FINCA Afghanistan receives its primary funding from the Microfinance Investment Support Facility for Afghanistan (MISFA
MISFA
The Microfinance Investment Support Facility for Afghanistan is a national microcredit program in Afghanistan. MISFA was launched by the Government of Afghanistan in June 2003 as a multi-donor microfinance wholesale facility to build the microfinance sector of Afghanistan.MISFA enables low-income...
) through a $30 million grant. In November 2006, this grant was augmented by $10 million through the United States Agency for International Development (USAID) as part of an $80 million rural microfinance project to promote development and stability in Afghanistan. The project, the Agriculture, Rural Investment and Enterprise Strengthening (ARIES) Program, will also complement USAID's existing Alternative Livelihoods Program
Alternative Livelihood
Alternative Livelihood Programs are the name given to government attempts, especially in South America to replace the illicit cultivation of banned substances, such as opium or coca, with alternative, legal crops or other activities as a source of income....
and will help establish a market-based, wholesale Rural Investment Fund to provide financing to cooperative
Cooperative
A cooperative is a business organization owned and operated by a group of individuals for their mutual benefit...
s, farmers' associations, and small and midsize enterprises throughout the country, in a push to eradicate the cultivation of opium poppies
Opium poppy
Opium poppy, Papaver somniferum, is the species of plant from which opium and poppy seeds are extracted. Opium is the source of many opiates, including morphine , thebaine, codeine, papaverine, and noscapine...
.
FINCA Afghanistan is also a board member of the Afghanistan Mircrofinance Association (AMA).
See also
- FINCA InternationalFINCA InternationalThe Foundation for International Community Assistance is a non-profit, microfinance organization, founded by John Hatch in 1984. Sometimes referred to as the "World Bank for the Poor" and a "poverty vaccine for the planet", FINCA is the innovator of the village banking methodology in microcredit...
- FINCA Uganda LimitedFINCA Uganda LimitedFINCA Uganda Limited, also known as FINCA Uganda, is a Microfinance Deposit-taking Institution in Uganda. It is a subsidiary and member organization of FINCA International, headquartered in the United States of America.-Location:...
- Islamic bankingIslamic bankingIslamic banking is banking or banking activity that is consistent with the principles of Islamic law and its practical application through the development of Islamic economics. Sharia prohibits the fixed or floating payment or acceptance of specific interest or fees for loans of money...
- John HatchJohn HatchDr. John Keith Hatch is an American economic development expert and a pioneer in modern day microfinance. He is the founder of FINCA International and the Rural Development Services , and is famous for innovating village banking, arguably the world’s most widely-imitated microfinance...
- MicrocreditMicrocreditMicrocredit is the extension of very small loans to those in poverty designed to spur entrepreneurship. These individuals lack collateral, steady employment and a verifiable credit history and therefore cannot meet even the most minimal qualifications to gain access to traditional credit...
- MicrofinanceMicrofinanceMicrofinance is the provision of financial services to low-income clients or solidarity lending groups including consumers and the self-employed, who traditionally lack access to banking and related services....
- Village BankingVillage BankingVillage Banking is a microcredit methodology where-by financial services are administered locally rather than centralized in a formal bank. Village banking has its roots in ancient cultures and was most recently adopted for use by micro-finance institutions as a way to control costs...
External links
- FINCA's Official Website
- Microfinance Investment Support Facility for Afghanistan (MISFAMISFAThe Microfinance Investment Support Facility for Afghanistan is a national microcredit program in Afghanistan. MISFA was launched by the Government of Afghanistan in June 2003 as a multi-donor microfinance wholesale facility to build the microfinance sector of Afghanistan.MISFA enables low-income...
)