The Afghan economy as a whole has shown considerable gains over the past seven years ( ) but the benefits have not been felt by rural populations where most people still live by subsistence farming. Even where Afghanistan could be self-sufficient in agriculture-related products, the country imports vast quantities of food and other easily-manufactured daily-use items, while the exports sector remains small and undiversified. Hopes of rebuilding some measure of economic wellbeing following the departure of the Taleban government are still unfulfilled. Despite the delivery of more than $500million of block grants and MRRD programs ( ) to some 26,000 communities (an average of $20,000 per community) the rural economy remains stagnant and the population, poor.
Afghan unemployment has been chronic (forty years of war, deconstruction and stifled development efforts) and is today, acute (reported rate of 40% unemployed – higher for women and rural populations). Unemployment is crippling development progress in Afghanistan, just as it undermines societies throughout the world.
Province/District SME
Non-Financial support [BDS]
Province/District SME
Access to Finance MFI/Banks
Community-level enterprise Non-Financial support [BDS]
Community-level enterprise
Access to Finance VSLA
In the West, unemployed young men go back to school, join the army, turn to drugs and crime, emigrate or languish in depression. The first option is available to very few Afghan youth. Joining the army may translate into joining a local militia or the Taleban, with obvious consequences. Meanwhile the opium trade is as difficult to eradicate in the poppy areas as it is in the West. Migration takes the best talents abroad and creates dependency on remittances while crime - informal, organized or institutional - afflicts all members of the Afghan population who are working, making depression and frustration a general malaise.
Unemployed young rural women have even fewer options than their brothers: unable to access the market or work place, more often than not they must rely on a judicious marriage and benevolent spouse.
While Cash-for-Work projects may provide temporary jobs ( ), sustainable employment can only arise from the development of legal private enterprise; however the necessary environment to enable business emergence is weak to non-existent.
A comprehensive national survey of SMEs [ ] identifies two major obstacles to private sector enterprise growth in rural Afghanistan: a shortage of business planning, management, and marketing know-how on one hand and shortage of access to formal credit on the other hand. More than 60% of surveyed SMEs indicate a need for knowledge-based business development services (BDS) and 96% of enterprises have reported an interest in accessing financial services while a mere 7% have ever received a loan.
Community-level micro enterprises and individual producers identify similar market failures with respect to their enabling environment (BDS) and access to productive credit. Micro-finance institutions have difficulty reaching out to clients in rural communities: community members lack either collateral or a credit record.
AREDP – Overview
AREDP is designed to address issues of enterprise access to financial and non-financial services so that enterprises can form, grow and employ rural men and women. This is done at the community level by encouraging savings and by promoting loans to groups of micro-enterprises receiving technical and business development services.
At a higher, district or provincial level SMEs are supported in accessing credit packages from commercial banks or Micro-Finance Institutions and in obtaining business development services as identified by the Program and the SMEs.
Program Objectives
The ANDS proposes a strategy ( ) designed to achieve improved quality of life for rural citizens – one in which food security is assured, basic services are provided, incomes increase with households actively engaged in legal activities, employment opportunities expand and where people live in a safe and secured environment.
The over-arching developmental goal of AREDP is increased income and sustainable employment opportunities for men and women through supported rural enterprises.
A Results & Monitoring Framework was jointly developed by AREDP and the World Bank identifying the following Outcomes:
Component #A:
Improved access and linkages to financial resources, and relevant business knowledge delivered to targeted community enterprises to enhance sustainable livelihoods activities.
Component #B:
Targeted Small & Medium Enterprises have increased access to credit and technical knowledge to improve their sales and productivity
Component #C:
An effective project management system is established, and coordination, learning, and quality enhancement is achieved
Project outcome indicators for five years include
- 70% of supported Enterprise Groups (EGs) will have increased their net revenues by over 50% in five years;
- At least 30% increase in direct and/or indirect employment by SMEs and EGs;
- On average SMEs report at least a 50% increase in purchase of rurally produced inputs;
- 50% of supported EGs are still operating 2 years after start-up.
Geographic focus
While AREDP intends to be national in scope and to eventually cover all 34 provinces, the IDA/DfID program will first roll out in 5 provinces that have been selected on criteria of potential for enterprise development and good NSP track records. The provinces of the first roll-out are (in order of priority for roll-out):
- Parwan: Ningrahar Bamyan Balkh Hirat
When rolling out in these provinces, AREDP will first target more promising districts until further funding and capacity is developed within the program to scale up further.
In addition, AREDP will begin work in specific provinces under separate bilateral agreements (Helmand; Kandahar; Uruzgan; Daikundi). Under the bilateral agreements, AREDP activities in the provinces will follow the general AREDP approach and key principles, but may be adapted to account for special regional conditions.
Program components
AREDP is divided into two program components and one functional and support component.
Component A:
Community-based Enterprise Development
A1. Community Facilitation
A2. Support to Enterprise Groups
A3. Access to Finance for Community Groups
Component B: SME Development
B1. SME Facilitation
B2. Business Development Support for SMEs
B2. Access to Finance for SMEs
Component C: Program Management Support
C1. Program Management
C2. Monitoring & Evaluation
C3. Governance/Accountability, Gender and Third Party Audits
Targets over five years
Outcome Indicators
|
YR1 |
YR2 |
YR3 |
YR4 |
YR5 |
O 1 |
15/5* |
25/10 |
40/15 |
55/25 |
70/50 |
O 2 |
5%
SEs |
10% SEs |
15% SEs |
25% SEs |
35% SEs |
O 3 |
|
20% |
30% |
40% |
50% |
O 4 |
90%
YR1 |
80/90
YR1 &2 |
70/80
YR1 &2 |
60/70
YR1 &2 |
50/70
YR1 &2 |
* 15/5= 15% of targeted Enterprise Groups increase their income by 5%; SE= Supported Enterprises (both Community and SME)
VSLAs, Enterprise Groups and SMEs
|
YR1 |
YR2 |
YR3 |
YR4 |
YR5 |
VSLAs |
65 |
261 |
523 |
719 |
916* |
EGs |
654 |
1,308 |
2,616 |
3,597 |
4,578* |
SMEs |
|
25 |
38 |
50 |
63** |
* At least 70% EGs and VSLAs maintain accurate and up-to-date records of accounts; and have a good governance structure;
** At least 50% of SMEs that meet the partial guarantee scheme criteria and apply for a loan and receive it;
Employment (New Jobs)
|
YR1 |
YR2 |
YR3 |
YR4 |
YR5 |
B2( ) |
806 |
1,613 |
2,688 |
4,031 |
5,644 |
At least 30% increase in direct and/or indirect employment
Implementation Principles
Market orientation
All program interventions will be directed by local and international customers' needs. Community enterprises and SMEs will be empowered to engage directly with the market to make their own decisions.
Sustainable Businesses
All program activities are aimed at developing long-term economic potential and creating sustainable businesses that will persist long after the duration of the program.
Clients decide
AREDP will follow a non-prescriptive approach in all program interventions and will empower clients to make their own informed decisions.
Improving coordination
AREDP aims to integrate the disparate activities of other projects, agencies and institutions into an effective national enterprise development program. The program will assume a coordinating function and act as a source of knowledge for other organizations.
Building partnerships
AREDP will not duplicate existing programs, but will rather partner with the private sector, other donor-funded initiatives, government programs and particularly the burgeoning financial sector wherever possible.
Simple design
AREDP will set up minimal structures in a few suitable provinces and gradually scale up as learning effects are continuously incorporated into the program.
Sharing best practices
AREDP will leverage opportunities for identifying and disseminating emerging successful business models among community enterprises and SMEs in Afghanistan.
Vertical integration
Working with a wide range of enterprises, AREDP aims to improve backward and forward linkages between community-based Enterprise Groups and SMEs.
Institutional Arrangements
In the first instance, the program will be set up and managed by the Government of Afghanistan through the Afghanistan Rural Enterprise Development Program (AREDP) Management Office within MRRD. Upon meeting certain benchmarks, AREDP will later be spun off into an independent agency at arm's length from the government. The agency will be governed by a board comprising of members from the public and private sectors.
For an overview of AREDP financial management arrangements, flow of funds, and expenditures as well as detailed Financial Management procedures, including chapters on Budgeting, Accounting System, Expenditure, Financial Reporting and Auditing please refer to the AREDP Financial Management Manual
Detailed procurement policies and procedures, including chapters on Definitions, Authorities and Responsibilities, Organization of Procurement Unit, Procurement Planning and Procurement Methods for Goods and Works as well as Procurement Methods for Services, are laid out in the AREDP Procurement Manual. A copy of the Procurement Manual can be provided on request.
“Environment and Social safeguards are not only required ... to protect the environmental and social fabric of Afghanistan, but also are legislated in the nation’s constitution, Environment Law and other related laws and regulations. As with many regulations, the challenge is to apply them, monitor their use and ensure that they are mainstreamed in the program’s operations in such a way that they become not only the responsibility of the safeguards unit, but rather everyone’s business.”
The Environmental and Social Safeguards Management Framework consists of a brief description of the Program and ESMF strategies in the World Bank; relevant Afghan laws and regulations are discussed and a management strategy and plan proposed. A copy of the ESMF can be provided on request.
“Support men at all levels – community, district, province and HQs – to advocate for women’s equal participation in economic development, so that they play an active role in adjusting the social norms and challenging existing gender roles and relations”
AREDP has a Gender Equality Strategy providing Key Principles and Gender Specific actions to be included in the implementation of components A, B and C. For a copy of the GES apply to the address at the foot of the page.
