27 JULY 2013 | HERAT, AFGHANISTAN

 

When the Afghanistan Rural Finance Company’s clients asked for Islamic loans, its president and CEO turned to USAID for help. Hashmat Amarkhail knew what his clients wanted - murabaha or financing compliant with sharia, which shares profit and loss between borrower and lender. But he didn’t know how the Company could provide it.

 

Technical assistance from USAID helped the Company meet its clients’ needs and from 2012 to February 2013, it has dispensed 10 sharia-compliant contracts, worth just under $2 million.

 

Mohammad Nazir Ayoubi, an auto parts dealer in Herat, is one of Mr Amarkhail’s satisfied customers. “It was very important to get additional capital for my business, but I wanted a loan that followed sharia principles,” he explains.

 

It is an increasingly common request in Afghanistan but till recently most of the country’s financial institutions did not offer sharia-compliant products. Islamic banking is relatively new, having begun in Egypt only in the late 1960s and Afghan institutions are yet to master its complexities. However, with USAID support, Bank-e-Millie, Ghazanfar Bank, Islamic Investment & Finance Cooperatives Group, and Afghan Growth Finance have started or enhanced their Islamic banking portfolio. Two other banks - Afghanistan International and Pashtany - have asked for technical assistance.

 

Ten senior officers, including a woman, from Afghan financial institutions were sent to Malaysia for a first-hand look at Islamic banking. Taib Sidiqi of Da Afghanistan Bank said the tour resulted in the promise of technical support from Malaysia’s central bank.

 

At least three Afghan banks have started discussing an Islamic correspondence banking agreement with Malaysia’s Bank Islam Berhad. This will enable them to offer international financial services to clients and is a “crucial step in the development of Afghanistan’s banking sector,” said Mirwais Naseri, deputy chief of operations of Bakhtar Bank.