Credit management units allow thousands of farmers to access credit
6 DECEMBER 2011 | NANGARHAR, AFGHANISTAN
CHALLENGE USAID designed the Agricultural Development Fund to work through commercial banks and other financial institutions, providing them with lending capital and compensating them for the risks inherent to agricultural lending. Nonetheless, banks were in general unwilling to provide financial services to the agriculture sector. This issue had the potential to render a USAID project unable to reach the farming community and promote the growth of Afghan agriculture.
INITIATIVE To smooth the progress of lending to the agriculture sector, USAID developed and introduced the concept of credit management units, which are small functional groups operating within non-financial intermediaries, including farmer associations, cooperatives, and agribusinesses. Funded in part by USAID, the credit management units process individual loan applications, disburse loans, and ensure timely collection. The typical credit management unit includes three to four employees from the same communities in which the intermediary institution operates, thereby banking on social capital and local knowledge. This concept has been made possible through a focused strategic approach based on responsible credit decisions, close collaboration with the Afghan government, and a commitment to innovation.
RESULTS In the first eight months after the concept was introduced, more than 4,000 farmers have accessed credit through a group of cooperatives, an agribusiness association, and credit management units operating within two farmer associations. These organizations have disbursed, managed, and collected loans achieving and maintaining a “zero” default rate.
Last updated: January 12, 2015