Moving Beyond ‘Hawala’
Access to finance is one of the most pressing problems faced by businesses in Afghanistan. After almost three decades of conflict and economic isolation, the finance-related institutional landscape in Afghanistan is highly undeveloped, leading to a high dependence on donor financing and a large informal finance sector, known as the ‘hawala’ sector. While a number of different development agencies were involved in addressing discrete elements of the financial sector reform agenda, making considerable progress in key areas, no larger plan for integrating their efforts existed.
OTF therefore began a process of developing a larger, integrated strategy for financial sector reform in Afghanistan. Based on an analysis of the current state of the financial sector, Aref worked with a variety of stakeholders – including the Central Bank, the World Bank/IFC, Asia Development Bank and USAID-related projects – to develop high-level growth targets for the development of the formal financial sector.
Establishing goals to guide the reform process was followed by the implementation of a three-market foreign investor survey. The survey data formed the foundations for subsequent recommendations for action, and importantly informed the future planning and institutional development of a nascent investment support agency.
The final strategy brought together the diversity of donor and government programs into a clear framework for financial sector reform, focusing on three main areas: legal framework, intermediation capacity development, and domestic and international outreach. The strategy provided guidance on sequencing and prioritization of a long list of potential efforts, demarcating clear roles and responsibilities among all major actors supporting private sector reform. The strategy has subsequently been adopted by the Asia Development Bank to form the foundations for a $40-50 M private sector and financial reform project.
- Latest
- Aref Adamali works as a regional economist for the World Bank Group, working out of Nairobi and Istanbul. He spent 5 years before this designing and manufacturing furniture. Having previously advised governments and businesses in developing economies on competitiveness and innovation, he applied some of this same advice to his family’s business. He realized that it is harder to implement good advice than to give it. So he is now back to just giving it.
