Micro finance Investment Support Facility for Afghanistan

Despite the progress in improving macroeconomic stability, poverty remains the biggest problem for Afghanistan. Some latest surveys showed that almost every other Afghan is living under the poverty line. Moreover, an estimated 45% of the population is unable to purchase sufficient food to guarantee the world standard minimum food intake of 2,100 cal/day. An additional 20% of the population is concentrated close to the poverty line is at risk of falling into poverty.
1.0 Background
A decade of relentless political violence through years of civil war before 2001, the predominantly rural economy was severely weakened. Livelihoods were devastated by the decimation of livestock and agriculture production. In addition to the high incidence of consumption disparity, there is a significant difference in poverty levels among provinces, and between rural and urban communities as 36% and 21% respectively.
Most of the rural women of Afghanistan are faced with vulnerable living conditions in terms of income, security, social protection, availability and access to food due to absence of a male head of household killed during war and loss of assets. This vulnerable group has a very low resilience and is very much prone to use resilience-damaging coping strategies for survival of their family members. Moreover, the vast majority of women do not participate in paid work, making them highly dependent on their husbands or families or any kind of unusual jobs. The literacy rate among women is also very low when compared to that of men.
Poverty levels in Afghanistan vary by season. This further compounds the understanding of poverty in Afghanistan. The food security monitoring survey suggests that households tend to have the richest consumption in summer following the harvest with restricted food consumption during winter.
Afghanistan has the lowest level of economic inequality in South Asia as measured by the Gini coefficient inequality does exist between many segments of Afghan society. The country’s rural population is approximately 80 percent of the national total. The chief characteristics or rural poverty is high food insecurity and a lack of access to infrastructure and basic public services. Rural Afghans suffer from a high degree of illiteracy and a low level of education. Rural households are highly dependent on agriculture, although non-farm activity has begun to play a bigger role in survival strategy of the rural poor. The poorest of rural households are those who live in remote and mountainous areas, who do not possess land or livestock, and whose head of family is illiterate or without any education.
Over the years, Afghanistan has made only modest progress in reducing poverty with around a third of its population living in poverty. Poverty remains a serious concern. The lack of social assets in terms of deficient skills, scant access to basic services – education, health, water supply and sanitation and social exclusion is the major constraint to reducing poverty in Afghanistan. A large section of the population still lives in poverty and a significant section of the population are still trapped in extreme poverty. The poorest have lower level of assets, less employment opportunities, and greater vulnerability to economic shocks. They are unlikely to participate in the conventional microfinance programmes since they are too poor or too vulnerable to follow the repayment schedule. There is an urgent need for more effective social safety nets and programs specifically targeted at the poorest. New livelihood security approaches are needed to address the specific constraints of the ultra poor.