In the unsettling atmosphere across parts of Afghanistan, small business owners and farmers are getting the capital they need from the country's Islamic investment and finance cooperatives.
The World Council of Credit Unions said in the last quarter alone, 30 IIFC or credit unions distributed nearly 8,000 loans worth $7.4 million and increased total membership by 10%.
"The IIFC structure is quite different from other microfinance institutions and banks in Afghanistan," said Barry Lennon, WOCCU's senior vice president who oversees the council's programs in Afghanistan. "The Afghans who become IIFC members each own a piece of these Islamic cooperatives. They see the IIFCs as Islamic financial institutions where they can access fully Shari'a-compliant products and services."
With funding from the U.S. Agency for International Development through its WOCCU-managed Rural Finance and Cooperative Development program, the IIFCs have brought in an increasing number of members in high-risk provinces, including Helmand, Kandahar and Uruzgan.
IIFC membership development officers in the country also work with board members who are shura, or community council, leaders to travel into previously unserved areas and introduce the IIFC to groups of small farmers and business owners. A female membership development officer from Nangarhar province is reaching out to women's groups in the area.
Recent funding from the U.K. Department for International Development will build on the Rural Finance program and allow five IIFCs in Helmand province to test a hybrid loan product form WOCCU that combines financing for equipment leases with working capital lines of credit. The new product will target entrepreneurs and farmers who have the potential for expansion but lack reliable financial records or collateral to guarantee a loan.
Members will be able to access larger and longer term loans to invest in their businesses while the IIFCs' ability to recover and resell leased assets will reduce the institutional risk in lending. WOCCU said it expects the new product will increase loan demand and accelerate IIFC sustainability in the south.
WOCCU is also training IIFC employees on financial monitoring systems and accounting procedures so that they can successfully and independently perform their jobs in the future. IIFC financial management software was translated into Pashtu, one of the local languages, to make it easier for employees to use the system.
The IIFCs are the first and only cooperative financial institutions in the country to offer products and services compliant with Islamic Law, according to WOCCU. Since helping the first two Afghan IIFCs open their doors in 2005, the council has worked with the Afghan people in 14 provinces to establish a total of 40 IIFCs and points of service, 25 of which are located in the conflict-ridden southern and eastern provinces. Today, the IIFC network boasts a growing membership of 70,047 and $20.3 million in assets. WOCCU estimates that nearly 45,903 jobs have been created over the past year with IIFC financing.
"The member ownership and the participation of local elders have permitted the IIFCs to penetrate remote rural communities where others haven't been able to reach," Lennon said.
In November 2009, WOCCU helped organize and obtain a license for an apex association called the IIFC Group that now links the country's growing IIFC network. The group provides operational oversight and technical assistance to IIFC staff. Its nine-member board of directors represents a mix of Afghan intellectuals, government representatives, Islamic scholars and local shura leaders. One woman director represents IIFCs in the north.
"No one dares to visit provinces like Helmand and Uruzgan, but the IIFCs are out there in those rural and highly volatile areas serving the needs of the unbanked," said Mahir Momand, IIFC Group CEO and director of risk management. "IIFCs have not only helped in the economic development of rural communities at large, but they have also created jobs for those who might otherwise be recruited by the insurgency."
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