May 2006

Misfa In Afghanistan

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MISFA is committed to building a system that provides flexible, convenient and affordable financial services for poor people throughout

The origin of MFIs
The end of the war in December 2001 saw a huge unmet demand for microfinance in Afghanistan. But the picture looked bleak. With a non-functioning financial sector, a total absence of commercial players, willing to serve the poor and lack of delivery capacity among existing Microfinance Institutions (MFIs), foreign donors were asked to step in. The issue facing everyone – foreign donors and Afghans alike – was how to meet that demand and energise the development of an entire microfinance sector that will serve the Afghan people beyond tomorrow.

Strong donor interest in post-war reconstruction efforts in Afghanistan led some to see it as an opportunity to build a microfinance sector from scratch. Without new thinking, they realised, donors and government policy makers could easily fall into the kind of 'bad practice' witnessed in other post-conflict situations. The tendency to see microfinance as a 'quick fix' for immediate problems of poverty and unemployment could result in a heavy influx of donor money that the institutions on the ground would be ill-equipped to administer. Or worse, politically-motivated subsidised credit could severely distort the financial market and damage its future long-term growth.

So instead, they came up with the idea of MISFA, the Microfinance Investment and Support Facility, Afghanistan.  MISFA was set up into 2003,  at the invitation of the Afghan government,  to get donor coordination 'right' from the start and avoid the counter-productive efforts that have emerged from conflicting donor objectives in other post-conflict situations. It was the first facility of its kind, pooling diverse donor funding mechanisms and converting them into streamlined, flexible support to microfinance institutions in Afghanistan, tailored to local priorities and accompanied by technical assistance and strong performance monitoring.

A vision for citizens
Today, MISFA is committed to building a system that provides flexible, convenient and affordable financial services for poor people throughout Afghanistan. The goal is to build an integrated financial sector, removing the barriers that separate the microfinance community from the broader financial system, and, ultimately, to provide access to financial services for all. While MISFA has started with direct support to the development of NGO led MFIs, it seeks ultimately to work with a whole range of distribution systems – NGOs, commercial banks, cooperatives, insurance companies

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