Most of the SHG members who complete the enterprise development module are motivated to start new enterprises or enhance existing ones. A majority of these members are, however, constrained by lack of capital to start or enhance the enterprises. For most, access to the internal group savings is enough to meet their needs, but the some will over time need access to additional finance. In an effort to overcome the financial challenge facing its members, HiH Af has identified two approaches through which its members can access credit. Members are considered eligible to access credit directly through HiH Af’s Enterprise Incubation Fund (EIF), or, indirectly through links to other existing MFI partners once they fulfil basic requirements.
A dedicated EIF has been set-up for credit expansion and building up a credit history of group members. Applying a pro-poor approach, the Fund will be available for qualified members and intended solely for income-generating activities. The EIF provides initial credit where MFI partners may be unwilling to provide credit until a track record has been established by the SHG members. It will offer Sharia-compliant products following Islamic financial principles, including interest-free loans but with cost-covering access fees in order to move towards financial sustainability of the operation.
Once borrowers have established a track record they will be transitioned to established microfinance providers thereby reducing the demand on the EIF itself, which can be kept relatively small while continuing to serve its vital catalytic role. HiH Af will coordinate its work with the Microfinance Investment Support Facility for Afghanistan (MISFA) and Afghanistan Microfinance Association (AMA) and cooperate with its main partners, with a view to apply emerging best practice and align with identified priorities, policies and plans.