Credit services are the main products for all the MFIs with variations in characteristics such as lending methodology, amount and purpose across the MFIs and provinces. According to a MISFA impact study, 89% of the loans were used for productive purposes. 53% of surveyed households used their loan to expand their business and 28% for start-ups. Generally interest rates on loan products offered by MFIs depending on terms and type of product/guarantee or lack thereof range from 1.4% – to 2% flat per month or 17% to 24% flat per annum. There has been some downward pressure on pricing, particularly in Kabul due to competition among the MFIs. In almost all cases loan repayment starts almost immediately and repayments are on a weekly, biweekly or monthly basis.
Voluntary savings are forbidden by law to MFIs that are not registered as DMFIs. Existing MFI therefore can only mobilize mandatory savings. Although savings products are offered by a few MFIs and made compulsory by others. Eight of the current 15 MFIs include some kind of savings product for members of the groups. None of the MFIs have offered an insurance product. Voluntary savings are forbidden by law as only mandatory savings can be mobilized; otherwise MFIs fall under DMFI regulation.
MISFA considers Islamic microfinance as a great opportunity and is paying close attention to its development. Currently 4 out of 15 MISFA partners offer Sharia compliant products and consider them as very promising not only for clients but also for community leaders and authorities.
Active banks in the microfinance space, i.e. FMB-A and BAB, are targeting micro and small business owners. Other services such as micro-leasing, micro-insurance and micro-remittance are not practiced in the country.
According to a recent study by Afghanistan Research and Evaluation Unit (AREU), on the microfinance sector in Afghanistan, the MFIs developed a simple and limited range of credit products that are easy for new loan officers to introduce. Such standardized product portfolio is easy for the MFI to monitor, but did not necessarily meet a client’s desire for loan products fitting their specific livelihood activities. The mismatch with client interests could have been particularly the case in rural areas, where cash flows are irregular, returns low and risky and come after a significant maturity period. Therefore, product simplicity, while meeting the short term interests of MFIs, eventually backfired for not being more concerned with client needs.