March 13, 2009

Rebuilding Afghanistan through Rural Enterprise Development

On March 4, 2009, I had the pleasure of meeting Ehsan Zia, Afghanistan's Minister of Rural Rehabilitation and Development (MRRD) and Javaid Zeerak, Coordinator for the Afghanistan Rural Enterprise Development Program (AREDP). I very much enjoyed having a direct discussion with Minister Zia and Mr. Zeerak and the substance of our meeting was focused on building Afghanistan's economy through agriculture and agribusiness development.

The AREDP's development objective is to have higher market participation of targeted rural enterprises, which will result in increased income and sustainable employment opportunities. AREDP's "is an initiative designed to improve all levels of business development and entrepreneurship from sole proprietorship and micro-enterprises to Small and Medium Enterprises [SMEs], in order to improve rural livelihoods and expand employment opportunities across rural Afghanistan," according to a summary document. The initiative will be managed by an office with Afghanistan's Ministry of Rural Rehabilitation and Development. An governing board will consist of members from the private and public sectors. The AREDP "is intended to be national in scope and will build on other developmental initiatives of the Government of Afghanistan, donors, and MFIs [microfinance institutions]."

AREDP consists of three program components: Community Enterprise Development, SME Development, and Program Management. The Community Enterprise Development will provide support to strengthen and expand business and market skills of enterprise groups. In addition, the program will facilitate rural access to financial services and resources.

"The program will create and provide support to Enterprise Groups and Producer Associations, as well as establish a sustainable basis for rural financial services by forming Savings Groups. The program aims to link Savings Groups to existing MFIs wherever possible, and for this purpose will closely cooperate with MISFA [Microfinance Investment Support Facility for Afghanistan]. If there are no MFIs operating in a region, the program will try to attract MFIs to set up branches in the targeted region and will provide some assistance in start-up costs, in line with what is provided by MISFA. In the case that there are no suitable MFIs in an area, the program will provide assistance in the set-up of Village Savings & Loan Associations (VSLAs). After successful training, the VSLA will receive a seed capital of $2,000-$5,000 (depending on the size and membership of the VSLAs) and will manage loans to qualified borrowers."

The AREDP will offer business development and technical support, and credit advisory services to facilitate SME development. "In order to further stimulate lending to SMEs by banks and MFIs, the program will also consider capitalization of banks on agreed terms to lend to SMEs in select value chains. Furthermore, in an effort to promote innovation and encourage investment, the program will also sponsor an annual competition for an innovation prize of up to 100,000 USD in each province."

AREDP's program management will focus on the implementation oversight, project planning, governance and coordination, and capacity building and institutional development of the program. "In addition, this component will include an Office of Research and Technical Services (RTS) that will provide backstop support services to enterprises across rural Afghanistan. Where available, the clients will be connected to service providers from the non-governmental, MFI and private sectors; with the balance of services to be provided by the RTS itself."

Minister Zia and Mr. Zeerak are seeking funding approval from The World Bank for the Afghanistan Rural Enterprise Development Program. During our meeting, I recommended that the Minister take a more direct approach in engaging the private sector for financial, logistical, and technical support. For example, in Washington state, there are several agribusinesses that can serve as partners in implementing AREDP's strategic plan and I invited Minister Zia and Mr. Zeerak to visit Washington State to meet with industry leaders.

I know there are many challenges to Afghanistan's sustainable development such as security, lack of physical infrastructure, and a strong opium cultivation market, but the AREDP to empower Afghan's to own SMEs and participate in the global economy is a step in the right direction. Is it unrealistic to imagine finding "Grown in Afghanistan" produce in Costco or Whole Foods?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of Solutions for a Sustainable World.

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