Agricultural Credit: A Smart Investment

Potato harvesting in Bamyan
Potato harvesting in Bamyan
Agricultural credit has shown a direct impact on yields and income of Afghan farmers.
CHALLENGE:  Potato production is the mainstay in Bamyan province. Until 2010 productivity was low due to two fundamental factors: the high price and questionable quality of fertilizers available in the province, and the use of recycled and low quality seed.  While farmers were generally aware of the potential benefits of the appropriate use of fertilizers and the use of certified seed, they lacked the financial capacity to purchase them, and credit was simply not available.
INITIATIVE:  The Agricultural Credit Enhancement program provided agricultural loans to 7 cooperatives in Bamyan, relying on a set of institutional innovations developed by the program to manage credit risk.   The loans allowed commercial potato producers to purchase certified seeds and fertilizers, taking advantage of collective action as a way to reduce the cost of inputs.  In addition to the loans, the ACE program provided the borrowers with market contacts and facilitated sales transactions as a way to ensure the success of their farming operations.
RESULTS:  Agricultural credit had a positive and significant impact in the yields and income of borrowers, as compared with non-borrowers.  ACE borrowers realized 22.3 percent higher yields, 39 percent lower production cost and sold their high-quality produce at a price 8 percent higher.
Agricultural credit is unleashing the potential of Afghan agriculture, enabling farmers to put in practice modern production technologies and access high-value markets. Since July 2010, USAID’s ACE program has provided credit to over 11,000 farmers in 24 provinces of Afghanistan using innovative approaches to financial intermediation and risk management.

Last updated: January 12, 2015

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