Social Cohesion

Afghanistan Rural Enterprise Development Program

Project objective

The development objective of the Rural Enterprise Development Project for Afghanistan was to stimulate inclusive economic growth by harnessing the potential of micro-enterprise sector and its strategic linkage with high growth drivers, particularly Small Medium Enterprises (SMEs) and large agri-businesses, for sustainable employment and income generation in rural areas.

Project Summary

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Over 75% of the people of Afghanistan live in rural areas where agriculture is the primary activity and contributes about one third of the GDP (excluding the opium economy). However, poor governance, weak factor markets, inadequate marketing infrastructure and business development services, and poor post-harvest practices are limiting the economic development potential of this sector and constraining on-farm and non-farm employment opportunities, thus perpetuating poverty in the rural areas. The following are the key issues and challenges: (a) Poverty and Vulnerability; (b) Economic Slowdown and Increasing Insecurity; (c) Spread of Opium Poppy; (d) Weak Institutions; (e) Lack of Access to Finance and Poorly Functioning Factor Markets; and (f) Shortage of Business Expertise.

The Afghanistan Rural Enterprise Development Program had a satisfactory overall outcome, a satisfactory performance and the monitoring and evaluation quality was substantial. The lessons learned were:

  1. The AREDP developed a rural enterprise development model that could be replicated in fragile countries. The five key elements are: (a) group savings and credit, (b) economic mobilization, (c) aggregation of micro enterprises, (d) SME development, and (e) supply chain development.
  2. The original linear design flow at village level delayed EG development, because of weak implementation capacity and remoteness.
  3. The deliverable based payment improved service delivery in remote targeted villages. (4) In ensuring sustainability, the Project developed a graduation model for qualified SMEs to be BDSPs and matured EGs to become SMEs.