KABUL - In a boost to Afghanistan’s economy, which slowed down considerably this year, the World Bank (WB) has approved $50 million in grants for a national project comprising a number of Afghan enterprises that seek to reduce poverty and stimulate job creation through 2018.

“The new project aims to increase access to financial services for micro, small and medium enterprises, which will in turn help these enterprises grow and stimulate jobs creation,” said the WB Country Director for Afghanistan, Robert Saum, in a news release, issued on Tuesday.

Known as the Afghanistan Access to Finance Project, the scheme will provide $32 million provided to the microfinance sector and to a so-called ‘Ultra Poor’ programme which provides technical and financial support to “poorest households to help them graduate out of extreme poverty,” according to the news release.

The rest of the funds, $18 million, will be spent in supporting the expansion of the Afghanistan Credit Guarantee Facility, which provides partial risk guarantees to loans issued by commercial banks and microfinance institutions to small and medium enterprises.

“Afghan enterprises are labour intensive and have the potential to absorb part of the growing Afghan labour force,” said Mr. Saum. 

According to the United Nations International Labour Organization (ILO), there are currently around 823,000 unemployed Afghans. More than 400,000 Afghan youth enter the labour market every year and the country has “an increasing need to generate employment opportunities for its new labour market entrants, along with those who are already un- or under-employed.”

Following last year’s strong economic growth driven by “an exceptional agriculture harvest and rapid expansion of the services sector,” Afghanistan is facing a slowdown in growth this year – mainly due to uncertainty surrounding its ongoing political and security transitions, according to a WB study report released last month.

Afghanistan is slated to hold Presidential and Provincial Council elections on 5 April next year. The Presidential poll will mark the transfer of power from one elected president to another for the first time in the country’s history. The political transition coincides with a security transition as Afghan security forces have taken up security responsibility from their international allies, who are ending their combat mission by the end of 2014.

According to the WB news release, the $50 million in grant funding will be provided through the International Development Association (IDA), which is the Bank’s fund for helping the world’s poorest.

Established in 1960, IDA aims to reduce poverty by providing loans (called ‘credits’) and grants for programmes that boost economic growth, reduce inequalities, and improve people’s living conditions, added the news release.

The WB’s Afghanistan Access to Finance Project complements WB’s engagement with Da Afghanistan Bank (Afghanistan’s Central Bank) — notably through the ongoing Financial Sector Rapid Response Project — which aims at strengthening the capacity of Da Afghanistan Bank and at establishing key building blocks of financial infrastructure.

Related articles: 

- New World Bank study finds slowdown in Afghan economy 
 
- World Bank to grant $50 million for reforms in Afghanistan’s ‘high growth potential’ sectors 

- UN-backed conference highlights agriculture for economic growth, job creation (May 2013)