MISFA and Afghan Microfinance

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MISFA and Afghan Microfinance
Convergences 2015, the Annual Microfinance Forum,
Paris April 30th, 2009
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MISFA VISION STATEMENT
MISFA will have a positive economic and social
impact by facilitating the development of the
Afghan financial sector, increasing access to the
unbanked, especially women, and rural and poorer
households. As a double-bottom line
institution, MISFA will promote a sustainable
sector that operates without subsidies.
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CREATION AND EVOLUTION

• Government and Donor Initiative A top-down
  approach
• MISFA established as a single mechanism for
  channeling donor funding
• High risk strategy
• MISFA transformed into a limited liability
  company with independent board

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BACKGROUND AND RATIONALE
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SERVICES PROVIDED
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MISFA -- MANDATE
? Coordinate and channel donor funding to MFIs
? Oversee growth of the microfinance sector
? Create and implement sector vision and
strategy through
gt support and supervision of MFI partners
gt application of global lessons learned and
best practices
? Provide intense capacity building/technical
assistance to the sector
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MISFA SUPPORT
MISFA, a registered non-profit LLC, is able to
provide funding and TA to partners with the
support of
? Sole shareholder GoAs Ministry of Finance
? Intl donors CIDA, DFID, World Bank, CGAP,
USAID, SIDA, Oxfam Novib, the Govts. Of
Australia, Denmark, Finland, The Netherlands and
Sweden
? Board of Directors Independent Board led by
MRRD Minister Ehsan Zia and members from the
Afghan private sector and International
Microfinance experts
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FINANCIAL SUPPORT TO AFGHAN MICROFINANCE
As of March 09
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SECTOR FORECAST - MICROFINANCE
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SECTOR FORECAST

• Demand for Islamic finance products
• Demand for larger SME loans
• Demand for credit in the rural areas for
  agriculture and allied activities

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MISFA CORE PRINCIPLES

• Portfolio quality
• Accountability
• Sustainability

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MISFA OVERSIGHT
? Independent assessments and rating
? On-site monitoring
? Comprehensive/simple reporting
? Internal audits
? Sector analysis reports
? Extensive audits IFRS compliant
? 2 year Benchmarks
? Report card system
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MISFA STRATEGY 2-YEAR BENCHMARKS
Non-negotiable
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COMMERCIALIZATION OF THE MICROFINANCE SECTOR

• Payment of Interest from the beginning to instill
  commercial sense
• All MFIs have repayment schedule
• Loan term of 10 years (including moratorium of 5
  years)
• Payment on interest on a quarterly basis
• Principal repaid in 20 quarterly installments
• Denomination from US to Afghanis in 2008
• Transformation from NGO to Company (Non-profit
  LLC)
• Bank linkage and investment funds (BRAC MFI, Bank
  Alfalah)

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MICROFINANCE -- IMPACT
In 2007, MISFA commissioned the Institute of
Development Studies (IDS) to conduct an initial
baseline impact study some general observations
include
? Sector is young, has a long way to go but has
catered to unmet demand for credit
? Microfinance is inclusive spread across
different Afghan provinces, ethnic groups, and
urban/rural communities
? Sector overcame urban bias in the early days
-- almost 40 of all clients now come from rural
areas
? For every microfinance client, 1.5 job
opportunities were created
? This figure, extrapolated to all MISFA partner
clients, translates to 675,000 jobs for Afghans
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WAY FORWARD

• Consolidation of the sector mergers
• Encourage MFIs to create commercial linkages
• Eligible/capable ones will register as
  Deposit-taking MFIs and collect savings to expand
  the services offered and diversify funding
• Terms and conditions of MISFA loans will change
  over time
• Change in the mix of loan and grant funding
• Possible investment in the equity of the MFIs

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THANK YOU!