For generations, Afghanistan’s commercial farmers and agribusinesses had no way to borrow money to invest in their businesses. In 2010, the U.S. Agency for International Development (USAID), in partnership with the Afghanistan Ministry for Agriculture, Irrigation, and Livestock (MAIL), established the Agricultural Development Fund (ADF). USAID’s initial fund contribution of $100 million would be complemented by a technical assistance contract—the Agricultural Credit Enhancement Program—awarded to DAI.
The program ran into many obstacles, including Afghan banks’ unwillingness to participate, the Afghan government’s reluctance to register the ADF as an institution, and the requirement of many potential customers that their loans be Sharia compliant. But by the end of the project in February 2015, the fund had proven a resounding success with 202 loans to agribusinesses and intermediaries processed totaling $106 million, directly benefiting 35,000 end borrowers in all 34 provinces, and with a default rate of less than 5 percent.
In November 2012, the ADF was officially established as a development fund of the Afghan government. In June 2014, the ADF took another step toward becoming a standalone financial institution when Joel O. Carter, pictured below, was sworn in as the ADF’s first chief executive officer. Developments recently asked Carter about the ADF’s prospects for sustained, long-term success.
Q: In the face of the obstacles this project encountered from the start, how did DAI address the market for agricultural lending?
Carter: In two main ways. First, since Afghan banks would not work with us, we had to find other distribution channels, and so we established credit management units throughout the country as a way to manage risk. These were small offices of trained local Afghans who reviewed applications and disbursed and managed the loans. Second, we...