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The Netherlands Development Finance Company, a government-backed institution also known by its Dutch acronym FMO, recently announced it will loan the local-currency equivalent of USD 5 million to The First MicroFinance Bank-Afghanistan (FMFB-A), which is owned by the Aga Khan Agency for Microfinance (AKAM), a unit of Switzerland-based Aga Khan Development Network (AKDN) that provides microfinance services across ten different countries [1, 6]. Established in 2004, FMFB-A seeks to alleviate poverty and promote economic development “through the provision of sustainable financial services to the poor and underserved.” As of 2016, FMFB-A, which is organized as a limited-liability company, reported to the US-based nonprofit Microfinance Information Exchange (MIX) total assets of USD 158 million, a gross loan portfolio of USD 74 million outstanding to 57,000 borrowers, deposits of USD 93 million held for 131,000 customers, return on assets of 1.05 percent and return on equity of 6.3 percent [3, 4, 5].

FMO is disbursing the loan from the Massif investment vehicle, which is funded by the Dutch government and “focuses on small businesses and micro-entrepreneurs, women and youth entrepreneurs, as well as supporting innovations in inclusive business.” Massif has a net portfolio of EUR 430 million as of 2016 [2].

The vision of FMO is to help abolish extreme poverty, increase equality and support measures that reduce climate change.

It has total assets of EUR 8.5 billion (USD 9.5 billion) and profit before taxes of EUR 219 million (USD 245 million) for the year 2016 [2].

By Matthew O’Neill, Research Associate
Sources and Additional Resources:

[1] Information provided directly to MicroCapital by FMO

[2] MICROCAPITAL BRIEF: Netherlands’ FMO Lending $7.5m to ASA Pakistan for Microloans, Financial Education for 50k Women:
https://www.microcapital.org/microcapital-brief-netherlands-fmo-lending-...

[3] MICROCAPITAL BRIEF: International Finance Corporation (IFC) Signs Agreement with First MicroFinanceBank Afghanistan (FMFB), Part of Aga Khan Development Network (AKDN), to Strengthen Capacity to Introduce Housing Microfinance:
https://www.microcapital.org/microcapital-story-international-finance-co...

[4] MIX Profile, FMFB-A:
https://www.themix.org/mixmarket/profiles/fmfb-afg
[5] About FMFB-A:
http://fmfb.com.af/about-us/about-fmfb-afghanistan/
[6] About AKAM:
http://www.akdn.org/our-agencies/aga-khan-agency-microfinance/who-we-are...
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from the AKDN (below)

FMFB-A helps Afghans by offering a broad range of services and is actively engaged in research, product development and innovation to help increase access to financial services. Afghanistan was the first country in the region in which AKAM developed SME and housing finance products, supported by a grant from USAID to introduce construction advisory services, and this experience is part of a toolkit that has been developed by IFC to help other MFIs across the region. The Bank is the largest provider of financial services for micro and small businesses and households, with over 54,000 borrowers in 14 provinces and a portfolio exceeding US$ 59 million, including around US$ 12 million for small and medium entreprises. Since inception the Bank has disbursed more than 700,000 loans, with a total value exceeding US$ 400 million.

The Bank has also provided financial services to more than 137,000 individual depositors. FMFB is engaged in multiple partnerships including cooperation with MISFA, a governmental organisation, for grants that have funded the hiring of agronomists to provide free technical services to farmer clients and the bank itself; AKF USA, for grants to improve agricultural finance; USAID, for loans for onward lending at a lower interest rate; and collaboration with the Ministry of Agriculture.

Currently, enterprise loans constitute about 35 percent of the total portfolio value, followed by agricultural loans at 27 percent, SME loans at 18 percent and housing loans at 15 percent. Already the major provider of agriculture loans, which represent one-third of its portfolio, FMFB is in the process of launching new products in the agricultural value chain in the predominantly rural country in order to integrate the various players – input suppliers, implementing partners, and institutional buyers – for the purpose of improving trust, quality and stable supply and demand. FMFB is also the only MFI offering housing loans. In order to address the security risks and the remoteness of many clients, FMFB is pursuing mobile banking initiatives that are financially accessible, overcome connectivity and service issues, and have low operational costs. Other projects to expand reach include developing a dedicated livestock loan product, the introduction of ATMs, international remittance and deposit services, an educational loan product, and SMS banking, as well as opening new branches in commercial areas.