FINCA Afghanistan
From Wikipedia, the free encyclopedia
| FINCA Afghanistan | |
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| Type | Nonprofit Organization |
| Founded | 2004 |
| Headquarters |  Kabul, Afghanistan |
| Products | Financial Services Microfinance |
| Website | www.villagebanking.org |
FINCA Afghanistan is a nonprofit microfinance organization and an affiliate of FINCA International. Its headquarters is based in Kabul, Afghanistan.
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[edit] Background and history
FINCA Afghanistan was founded in 2003 through grants and loans supplied by several donors and funding agencies. FINCA Afghanistan began lending operations in the city of Herat 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. Further expansion is expected in 2007 and 2008.
As of February 28th, 2007, FINCA Afghanistan has a total of over 34,000 clients and $7.2 million in outstanding loans. Almost 10,000 of these clients are women.
[edit] FINCA Afghanistan's Islamic banking products
One of the major elements of FINCA’s success in Afghanistan has been its deference towards Islamic banking 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 the world’s first murabaha group-lending products.
[edit] 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.
[edit] 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) 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 cooperatives, farmers' associations, and small and midsize enterprises throughout the country, in a push to eradicate the cultivation of opium poppies.[1]
FINCA Afghanistan is also a board member of the Afghanistan Mircrofinance Association (AMA).
