The Role of NGOs and International Actors in Supporting Microfinance Post-2021 in Afghanistan

Saifullah Rahimi; Dr. Ajai Prakash

doi:10.36948/ijfmr.2025.v07i06.63612

The Role of NGOs and International Actors in Supporting Microfinance Post-2021 in Afghanistan

Author(s)	Mr. Saifullah Rahimi, Dr. Ajai Prakash
Country	India
Abstract	Since the political transition of August 2021, Afghanistan has experienced an economic contraction of historic scale, with real GDP falling by around 20.7% in 2021 and poverty and food insecurity reaching record levels. The microfinance sector, previously an important channel for livelihood support and women’s economic participation, has been hit especially hard. Between Q3 and Q4 2021, the number of microfinance clients fell from about 961,000 to 420,000, active borrowers from 306,728 to 121,049, and portfolio-at-risk over 30 days jumped from 7.1% to 28.3%. At the same time, sanctions, the paralysis of the central bank and bank de-risking have made formal fund transfers into Afghanistan extremely difficult for NGOs. This paper examines how NGOs and international actors have sought to sustain and re-shape microfinance and micro-enterprise support in this context. Using a desk-based qualitative methodology, the study synthesises secondary data from Afghan microfinance associations, UN and World Bank publications, and recent surveys of women entrepreneurs. It shows that (i) microfinance has partially shifted from conventional credit to Islamic microfinance and grant-based livelihood support; (ii) NGOs and UN agencies, especially UNDP through the ABADEI programme and women-focused MSME schemes, have become de facto anchors of inclusive finance, supporting tens of thousands of women-led firms and hundreds of thousands of associated jobs; and (iii) the World Bank and bilateral donors have created new trust-fund and project structures (such as the ARTF and the EMERGe project) that channel resources to microfinance providers and micro-enterprises while bypassing the de facto authorities. The paper argues that despite genuine gains, support to microfinance remains fragmented, heavily donor-driven and constrained by sanctions compliance, gender restrictions and financial-sector fragility. It concludes that a more coherent architecture is needed, centred on Islamic microfinance, de-risked fund channels, and explicit gender safeguards, if microfinance is to contribute meaningfully to Afghanistan’s recovery and the protection of women’s economic rights.
Keywords	Afghanistan; microfinance; NGOs; UNDP; World Bank; women’s entrepreneurship; Islamic microfinance; sanctions
Field	Business Administration
Published In	Volume 7, Issue 6, November-December 2025
Published On	2025-12-15
DOI	https://doi.org/10.36948/ijfmr.2025.v07i06.63612

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The Role of NGOs and International Actors in Supporting Microfinance Post-2021 in Afghanistan

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