REFILE-Microfinance faces hurdles in empowering Afghan women

(Corrects name from “Rand” to “Zand”, paragraph 16)

* Afghan micro loans face religious challenges

* Failure to repay can trigger domestic violence

By Michelle Nichols

KABUL, Dec 28 (BestGrowthStock) – In a dimly lit room at the back
of an Afghan house, 21-year-old Zahara is crouched on a plank
of wood weaving a large carpet on a loom that she was able to
buy using a microfinance loan of $1,100.

Zahara started weaving carpets when she was 10 and did not
go to school, but the loan from non-profit development group
BRAC allowed her to start her own business about 18 months ago
and she has since taken out two more loans of $330 each.

“When I first got the money, the carpets I was making were
small and now I can make bigger carpets,” said Zahara, who
heard about microfinance loans from her neighbour in Kabul.
“Before I made carpets for other people and now I make them
for myself.”

More than 1.5 million loans worth $831 million have been
given out in the past seven years, said the Microfinance
Investment Support Facility for Afghanistan (MISFA), which was
set up by the government in 2003 to coordinate the sector.

Thirty years of conflict have shattered Afghanistan’s
economy and infrastructure, leaving two-thirds of the roughly
30 million population illiterate and at least a third in dire

Aside from security fears, microfinance is facing a
shortage of skilled people to run programmes, as well as
challenges in reaching sparsely populated rural areas and
religious concerns among conservative Muslims about paying

“If you talk to the real villagers, they need money,” said
Fazlul Hoque, head of non-profit development group BRAC in
Afghanistan, which is responsible for half the country’s
430,000 microfinance clients. “We need to establish a credit

Unlike traditional bank loans which require paperwork such
as proof of identification and income, many microfinance
lenders simply require borrowers to become part of a support
group and verify their ability to repay.

The average annual income in Afghanistan is $370,
according to the World Bank. But Hoque said the default rate
on BRAC loans was low, around 3 or 4 percent.


Microfinance — developed more than 30 years ago by
Bangladeshi economist Muhammad Yunus, who won the Nobel Peace
Prize in 2006 for his efforts — traditionally targets women.
MISFA said 60 percent of current Afghan clients are women.

“Women are ignored, so one of our social missions is to
bring them out, so that there will be a kind of dignity of
women, they can have a better position in the family,” said
Hoque, adding that more than 80 percent of BRAC’s clients were

But the independent Afghanistan Research and Evaluation
Unit (AREU) said it would take more than access to
microfinance to empower women and build their social status.

“Credit can be a means to assist women to achieve more
decision-making power and autonomy, but there needs to be a
purposeful, culturally attuned strategy in place to support
this process,” said Paula Kantor, an AREU visiting researcher
and former director of the unit.

There are enduring limits on women’s rights across
Afghanistan more than nine years after the strict Islamist
Taliban were ousted after more than five years in power,
during which women were made to wear all-covering burqas and
were rarely allowed out in public for education or work.

A U.N. report earlier this month found that millions of
Afghan women and girls suffer from traditional practices such
as child marriage and “honour” killings, and that authorities
are failing to enforce laws protecting them.

AREU senior research officer Sogol Zand has been studying
microfinance and gender in Afghanistan and said that when a
loan helped improve a family’s economic situation it reduced
domestic violence, but when a family found it difficult to
repay their loan, the violence increased.

Microfinance also faces a religious hurdle because Islamic
law prohibits the payment or acceptance of interest fees. Some
microfinance organisations try to work around this by calling
an interest payment an administrative or service charge.

MISFA is working to develop a loan that would be compliant
with Islam, while some smaller microfinance groups such as
FINCA, which has about 9,000 Afghan clients, already offer
such loans.

“There are indeed a number of Afghans who do not
participate in mainstream microfinance … for fear of social
pressure,” said MISFA Managing Director Katrin Fakiri.
“Potential borrowers must have a choice between Islamic or
conventional loans.”


Fakiri said the Afghan microfinance sector was
consolidating to ensure it grows responsibly and to address
its challenges, the most obvious of which was poor security
limiting expansion.

“What makes this worse is the fact that many government
entities at the regional level have no adequate knowledge of
microfinance, its social mission and the fact that it is a
government-supported national programme,” Fakiri said. “As a
result, support for microfinance on the ground is weak.”

But the biggest problem was finding people with the skills
to run the programmes. Fakiri and Hoque said a lack of
educated staff created other issues such as mismanagement,
miscommunications and misperceptions.

Fakiri said MISFA was educating local government and
microfinance staff about the sector and had teamed up with the
Central Bank of Afghanistan, the Afghanistan Banking
Association and international donors to create the Afghanistan
Institute of Banking and Finance, which offers a basic
microfinance course.

Safia, 32, took out a BRAC small business loan for 70,000
Afghanis ($1,555) so she could improve her beauty shop in the
Kabul neighbourhood of Polisukhta. A large vase with fake pink
flowers adorns the window of Stara Beauty Parlor, where Safia
and her employee do hair and make-up.

Safia had to ask permission from her husband to get the
loan, but said her success had earned her more respect from him.

Posters of heavily made-up women with elaborate hairstyles
decorate the shop walls and a thin curtain in the front window
hides customers from people passing on the busy street outside.

“When I got the money it helped me to do a lot of work in
my shop,” said Safia, a mother of two. “I will be able to make
an independent future.”
(Additional reporting by Hamid Sayedi; Editing by Paul Tait
and Nick Macfie)

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REFILE-Microfinance faces hurdles in empowering Afghan women