The World Bank approved a $100 million grant on Monday, to help Afghanistan stabilize its financial sector and support small enterprises as the country strives to spur its recovery from COVID-19.
“As Afghanistan recovers from the negative impacts of the COVID-19 pandemic, strengthening its financial sector is key to accelerating the recovery,” said Henry Kerali, World Bank Country Director for Afghanistan.
Funded by the International Development Association (IDA), the “Strengthening Afghanistan’s Financial Intermediation” (SAFI) project, will enhance capacity of Da Afghanistan Bank (DAB) and also help the Ministry of Finance (MoF).
DAB will benefit from improving its financial system regulation and supervision, including by strengthening deposit insurance, financial infrastructure and modernizing its information technology.
“This new financial assistance will enable Da Afghanistan Bank to strengthen its capacity to maintain financial sector stability,” Kerali added.
The project will also help the MoF facilitate access to finance for micro, small and medium enterprises (MSMEs), including women owned and/or operated businesses, through risk-sharing, matching grants, and technical assistance.
More than half of Afghanistan’s MSMEs are financially constrained due to a weak economy, COVID-19 lockdowns, insecurity, and the political transition.
Kerali said the assistance will support the financial institutions in expanding lending to MSMEs, in a “sustainable way and facilitate temporary provision of matching grants to small and medium enterprises to retrofit and retool their businesses in response to impacts of COVID-19.”
President Ashraf had told the World Economic Forum (WEF) that the spread of COVID-19 reduced Afghanistan’s economic growth by nearly 30%.