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Financing Small and Medium ‎Enterprises in Afghanistan

Mr. Alimadad Rasoli, Mr. Aimal Mirza

Volume 2 Issue 4 | Dec 2019

DOI: 10.31841/KJEMS.2021.48

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Total Downloads: 23

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The objective of this study was to investigate Financing Small and ‎Medium Enterprises in Afghanistan. This ‎thesis has been completed with a ‎detailed research result with a set of findings and recommendations for ‎the ‎key stakeholders - Banks, SMEs and the Government. The research ‎included surveys, visits and meetings with ‎owners of SMEs, SME lending ‎banks and financial institutions that lend to SMEs. The data was collected ‎via a ‎questionnaire through Google Forms. SME owners were the main ‎target group for data collection. 385 was ‎selected as sample size because ‎the exact number of SMEs is not determined by GIRoA in Kabul city. Over ‎‎400 ‎SMEs were approached and requested for giving their opinions, 327 ‎responses were received. In addition of SMEs, ‎survey with 6 banks and ‎financial institutions was also conducted. ‎According to findings of this ‎study, in Afghanistan, sources of financing SMEs are personal investment, ‎loan ‎from relatives, loan from banks/financial institutions and loan from ‎donors. The survey results show that ‎around 89% of the SMEs need finance ‎for their businesses while only 16% (of 89%) of them have really ‎accessed ‎loans. 63% SMEs responded that financing is critical or very important for ‎their businesses. Banks, ‎financial institutions, donors’ programs and some ‎NGOs are providing loans to SMEs in Afghanistan. High rate ‎of interest ‎‎(21.2% average), lack of support from government, lack of policy/regulation ‎from Da Afghanistan ‎Bank for banks and financial institutions, lack of ‎Islamic loans and SMEs’ low capacity in loan processing are ‎the main ‎challenges of SMEs financing in Afghanistan. SMEs are facing lack of access ‎to finance and only a low ‎percentage of them have access to loans.‎

‎ ‎Keywords: SMEs, access to finance, loan, financial institutions, banks ‎