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WOCCU expands Islamic finance in Afghanistan with new member
MADISON, Wis. (12/26/12)--
Click to view larger image World Council and U.S. Agency for International Development officials met with IIFC Group staff and board members in Kabul last month to discuss IIFC network's progress and acceptance as World Council members.
After nine years in Afghanistan, the World Council of Credit Unions (WOCCU) has completed its donor-funded program there and welcomed the country's new credit union trade association, the IIFC Group, into WOCCU's membership this month.

Amid political uncertainty and a challenging operating environment, WOCCU created and formalized a network of 34 credit unions and points of service, known as Islamic investment and financial cooperatives (IIFCs), in 14 provinces across Afghanistan. Each outlet offers products and services compliant with Islamic law. Each cooperative is owned and controlled by local members.

As of November, roughly 92,456 IIFC members had accumulated $4.5 million in savings and shares. In the past three years, members borrowed and repaid $74 million to grow their farms and small businesses. (All amounts are in U.S. dollars.)

"World Council provided the institutional and policy framework, training and technical guidance under extremely difficult circumstances," said Brian Branch, WOCCU
Click to view larger imageIIFC membership development officers visited local markets, small business owners and farmers to introduce the IIFCs' products and services and to sign up members.
president/CEO. "The individual IIFC employees and IIFC Group staff have built this network often at great personal risk. We wish them continued success as they work to expand the network and to deliver services to the Afghan people."

Just after the country's inaugural democratic presidential election at the end of 2004, WOCCU Council established the country's first credit unions in northern Afghanistan with funding from the Microfinance Investment Support Facility for Afghanistan (MISFA). In two consecutive programs funded by the U.S. Agency for International Development (USAID), World Council expanded the IIFC network farther south and east, developing an array of Islamic financial products for farmers, small business owners and women in regions where the insurgency was strongest and where Shariah-compliant financial services were unavailable.

The credit union model's shared ownership and risk is well-aligned with the precepts of Islamic finance, said WOCCU. Every IIFC member contributes or purchases at least one $1 share; all members are considered owners; and profits and losses are distributed in member dividends at the end of the fiscal year. WOCCU worked closely with local religious leaders to develop appropriate products and services and to gain traction in more conservative communities.

Click to view larger image Female membership in the IIFCs has ranged from a high of 35% of total membership in one northern IIFC to an average 1%-2% in southern IIFCs, where women's role is highly restricted. (Photos provided by the World Council of Credit Unions)
WOCCU's latest USAID-funded Rural Finance Cooperative Development (RUFCOD) program (2009-2012) focused on providing broad access to financial services that would stimulate job creation, increase incomes and stabilize communities racked by decades-long conflict. The program bridged the service gap between commercial banking and the microfinance industry by providing financial services to small and medium-scale business owners, farmers, low and medium-income households and women.

During the RUFCOD program, the IIFC network expanded from 18 to 34 points of service and formalized under the Kabul-based IIFC Group, which provides technical assistance, training, supervision and loan capital to affiliated IIFCs. Today, about 2,000 new IIFC members open accounts each month, and the IIFCs disburse a monthly average of $2.2 million in new loans.

World Council's work in Afghanistan was its first experience establishing Shariah-compliant financial institutions, products and services.
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