ALTERNATIVE LIVELIHOODS IN AFGANISTAN What role can rural credit play?

Livelihoods: Definitions and Concepts

What are: Sustainable Alternative Livelihoods? Livelihood: Capabilities, assets and activities for a means of living. Sustainable : essential resources and support services must be available to maintain the livelihood. Alternative livelihoods – replacing economic dependence on illicit narcotics with alternative legal activities.

Human Capital Natural Capital Physical Capital Social Capital Financial Capital Some terminology Livelihood ‘Assets’ at the centre

Vulnerability Context Shocks Trends Seasons Livelihood ‘Assets’ Human Social Physical Financial Natural Livelihood Strategies Policies, Institutions & Processes Structures - Government - Private Sector Processes - Laws - Policies - Culture - Institutions Livelihood Outcomes + Sustainable use of resources + Income + Well-being - Reduced vulnerability + Food security [DFID’s] SL Framework Presentation © theIDLgroup 2004

Features of a ‘Sustainable Livelihoods Approach’ People centred Holistic – multiple strategies across sectors Builds on strengths and opportunities Dynamic Evidence base for policy Emphasises sustainability

Policies, Institutions, Processes Security and good governance Policies to facilitate improved livelihoods Laws and regulations that are enforced Institutions that respond to people’s needs Access to resources, information and services Enabling people to improve livelihoods

Some Sources of Livelihood in Afghanistan Agriculture Employment Small business Trade Migration Combination of activities

Approach to Alternative Livelihoods

Approach to AL development Understanding local economy and incentive structures Testing in the field Training and building support services Promotion and up-scaling Monitoring and Evaluation

Evaluating Alternative Livelihood options How will the programme effect different groups (including women)? Is there a market for a new crop/ product? What are the risks? Will it create perverse incentives? Is the programme socially, culturally, politically appropriate and sustainable? What support services need to be sustained? What is the impact on access to land and water?

What role can rural finance play in improving livelihoods?

Rural Finance in Livelihoods Strengthens asset base (financial capital) Increases resilience – lessens vulnerability Opportunities for investment: –Asset building –Income generation Supports social commitments Supports seasonal subsistence

Support needed for rural finance Related to ‘Policies, Institutions, Processes’ Enabling policies to promote investment and income generation Sustainable institutions with capacity Standards and regulatory framework

Conclusions Rural finance one component of improving rural livelihoods – but may not work without other support services. Finance is a means, not an end Developing rural finance for alternative livelihoods entails understanding current role of opium in livelihoods in general and in sourcing credit.