Characteristics and Challenges of Formal Agricultural Credit in Afghanistan: What Potential Policy Can Increase Participation? <Article>

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  • Characteristics and Challenges of Formal Agricultural Credit in Afghanistan : What Potential Policy Can Increase Participation?

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Abstract

Access to credit improves farmers’ productivity and income. However, farmers’ low access to credit remains a confounding issue in Afghanistan. This study predominantly aims to identify the challenges hindering the country’s financial sector from effectively serving agriculture. We used the triangulation method of data collection to capture the various dimensions of the challenges to formal agricultural credit access in Afghanistan. The results showed that commercial banks are reluctant to provide credit for agricultural purposes. Financial institutions supply credit to farmers in a fragmented manner, rather than through a unified mechanism. Furthermore, farmers cited the cumbersome process of obtaining credit and the lack of suitable collateral for it as the most pressing issues. Moreover, a thematic analysis of key respondents’ interviews revealed that vulnerability to risk, operational restrictions, societal constraints, and the less active real estate market are the predominant challenges to expanding formal agricultural credit. Finally, we present our suggestions to address these challenges.

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