IFC's most effective way of reaching smaller businesses is to help build commercially viable microfinance institutions. The institution finances credit worthy low-income entrepreneurs, most of them women, who otherwise would have no access to finance from mainstream banks.
The First Microfinance Bank of Afghanistan (FMBA) opened in May 2004 with IFC as a 17 percent shareholder. In addition to the investment, IFC integrated a comprehensive advisory services package to help establish FMBA and its operations. As a result, the bank developed internal training capacity and established a training center in one of its Kabul branches. Operations initially targeted urban micro and small enterprises in Kabul and the North Eastern provinces. Loan portfolio growth was rapid, and the bank subsequently decided to expand its branch network to Afghanistan’s other principal economic centers, including urban and rural areas, as the security situation permitted.
In December 2005, IFC provided a line of credit of $3.5 million to FMBA to further help scale up its micro and small enterprise lending activities. The bank has disbursed more than 30,000 microfinance loans over the last few years.
