MICROFINANCE INSTITUTION OXUS AFGHANISTAN MICROFINANCE INSTITUTION Salim Khan CEO OXUS Afghanistan

About OXUS Afghanistan Established 2007: Shareholders: OXH (96.8%), ODN (3.1%) and ACTED (0.1%) Footprint in 10 provinces: 24 branches 165,000+ borrowers served to date; AFN 8.3 billion AFN 951 million Gross Loan Portfolio Active customers 24,000 Strong team

Despite recent development of the microfinance sector in Afghanistan, growth potential remains strong Financial inclusion in Afghanistan is very low as compared to other countries Afghanistan has the potential of 15.6 million bankable market. Currently only 1.6 million have access to financial institution Most microfinance institutions have a strong focus in the capital cities of Kabul, Mazar Sharif and Heart rather and other urban areas. Source: World Bank

AFGHANISTAN MARKET Afghanistan Market Afghanistan population 32.5 million Bankable Market 15.6 million Industry Outreach 1.6 million OXUS Afghanistan Clients 24,000

Mission and vision AFGHANISTAN MARKET Mission “OXUS Afghanistan is a transparent and responsible enterprise engaged in providing financial services to the working poor and the underbanked in Afghanistan. OXUS is dedicated to build teams of recognized professionals, create and provide the most efficient microfinance services and improve the sustainable livelihoods of its customers.” Vision “To improve the sustainable livelihoods of our customers and to be the microfinance organization of reference in Afghanistan.”

Afghanistan market for MFIs Afghanistan is Muslim majority population country, where more than 99 % of population is out from financial sectors. According to a research report published by Microfinance Gateway, there are three main barriers of reaching the poorest of the poor i.e. physical, economic and religious barriers Poor people live in remote rural areas that have no access to financial services The payment of interest on loans is considered by majority of scholars and a sizeable population to be prohibited by Shariah principles.

Approach of Islam Toward Poverty Reduction AFGHANISTAN MARKET Approach of Islam Toward Poverty Reduction Approach of Islam Toward Poverty Islam strongly emphasizes the obligation of the society, particularly the rich, to contribute actively in poverty alleviation. “And those in whose wealth is recognized right, for the needy who asks, and him who is prevented (from some reason from asking)” (QS 70:24-25). Why the word ‘right’ has been used? (ZAKAH) poverty is a common problem faced by all countries. Islamic perspective, poverty is not just viewed from material aspect but also moral/spiritual. The Islamic concept in economic (muamalah) is strongly emphasizes the importance of ‘socio economic justice’ and economic system which contain ‘moral values’ and ‘moral filter’

AFGHANISTAN MARKET Opportunities How to bring this huge portion of papulation inside in finical sector? By providing access to financial services based on Shariah principles line with local culture and traditions aiming for poverty alleviation and economic development. All other Microfinance organizations offer only Murabaha product to individuals and groups in Afghanistan. However OXUS Afghanistan is expected to offer Murabaha, Ijarah, Diminishing Musharakah, Salam and Tijarah as its financial product.

How to achieve this Target? AFGHANISTAN MARKET How to achieve this Target? OXUS Afghanistan with the support of MISFA has entered into a Shariah consultancy for promotion/advancement of Islamic microfinance products in Afghanistan. Activity will be divided in two phases. Research, products design with pilot testing, developing training material and training of officers will be conducted in the first phase Whereas the monitoring and evaluation with feedback will be performed along with inputs based on experience, in the second phase.

Post Implementation review of pilot project AFGHANISTAN MARKET How to achieve this Target? Pilot project Phase 1 Part 1 Conduct survey and research for identifying the demand for the Islamic Microfinance products and gape analysis of Murabaha Part 2 Provide advisory services in respect of product development process and pilot projects Phase 2 Post Implementation review of pilot project

How to achieve this Target? AFGHANISTAN MARKET How to achieve this Target? The project will target the under-privileged population of selected areas of Afghanistan and will offer Shariah compliant microfinance / micro-credit products. The products to be offered shall be segregated as product offered for / business activity and the back-end Islamic financial product. Initially the back-end product will be offered Murabaha and Ijarah, while at a later stage, Salam, Diminishing Musharakah and Tijarah may also be offered.

SWOT Analysis AFGHANISTAN MARKET Strengths Weaknesses Opportunites Threats Security Lack of regulatory framework Low literacy rate Low infrustructure Opportunites Almost 100% Muslim population Only 10% bankable population have been reached so far 90% market is untouched Neutralize the security issues Economic development 57% population is on the poverty line or bellow Weaknesses High administrative cost High operating cost ratio Absence of trained human resources Switching the use of loans, creating mismatch of product design and user requirements Lack of experience in Islamic microfinance Lack of awareness among people Strengths Young and energetic staff came from different MF institution Acceptability by the staff Great experience of microfinance in the country Strong core banking system Strong bank infrustructure

AFGHANISTAN MARKET Thank you