Agricultural Credit Enhancement (ACE) Program Annual Workplan No. 2

The program's first year saw significant progress in providing credit, with total loans approved exceeding $16 million by June 2011. These loans were expected to benefit over 10,000 small commercial farmers. The program's projections estimated reaching $31 million in loan approvals by the end of the fiscal year, benefiting 12,000 farmers. However, the Ministry of Agriculture, Irrigation and Livestock's (MAIL) lack of compliance with the Implementation Letter 16 prevented the program from reaching these targets. Despite this challenge, the program established the basis for the operation of the Agricultural Development Fund (ADF) and increased awareness among interested parties regarding agricultural lending opportunities. ACE's approach to addressing value chain constraints through financial services combined with technical assistance in production, marketing, and trade produced encouraging results and new opportunities for commercial farmers with limited or no access to financial services. The program launched two innovative lending products, Factoring and a variant of Murabahah, to extend credit in a culturally sensitive manner to Afghan commercial farmers. These products were tested with five different companies and farmer associations, providing lending opportunities not previously available through financial institutions in Afghanistan. ACE assisted financial intermediaries through a combined package of loans and grants to improve the efficiency and reduce the risk in the management of ADF funds. The collaboration with non-financial intermediaries proved more reliable and successful during the first year of the program. In the second year, ACE will continue to provide technical assistance to interested financial institutions to build their capacity to serve the needs of agricultural enterprises. Capacity building will be an integral part of the work plan for year 2, focusing on developing the skills of ADF professionals, Advisory Board and Credit Committee members, and personnel of the Knowledge Management Facility. The program's ultimate goal is to make credit available to agriculture, with a focus on building the capacity of financial intermediaries to deliver agricultural credit to farmers. ACE will build upon the experience and lessons learned from Year 1, with a continued emphasis on providing strategic direction to the ADF and improving the efficiency and risk management of ADF funds. The program's success will depend on the development of a cadre of highly qualified professionals to manage the ADF, as well as the skills of the Advisory Board and Credit Committee members and the personnel of the Knowledge Management Facility.