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New Study Indicates a Drastic Decrease in Availability of Credit in Herat

01 Jul 2019 Wadsam Afghanistan Business News

The Afghanistan Research and Evaluation

Unit (AREU) launched a research paper titled “On Borrowed Time: The limits of

informal credit for livelihood security in Herat, Afghanistan” at an event in

Kabul on 1 July 2019.

The event was attended by a number of

high-ranking government officials, national and international organizations and

civil society organizations representatives who discussed in detail the

findings of the paper. It should be mentioned that this paper was produced as a

result of a joint effort between AREU and the Secure Livelihoods Research Consortium

(SLRC) and the Overseas Development Institute (ODI).

Within Afghanistan’s deeply

socially embedded economy, informal credit is a key mechanism through which

markets operate and through which the distributional economy provides access to

land, labor and income for rural households. This study undertakes an in-depth

examination of informal credit practices in two villages in Herat that differ

in size and economy, exploring how credit operates. In particular, it looks at

the ways in which credit is used and negotiated, its interaction with

livelihood churning, how credit mechanisms are gendered and the extent to which

social relations are underpinned by informal credit.

The study has found that the availability

of credit has drastically decreased in recent years. It has linked this to a

number of factors such as declining job opportunities in Iran, drought, access

to water, longer-term land subdivision and demographic trends that has reduced

the viability of agriculture as the mainstay of livelihoods.

The study notes, “Nonetheless, credit

access remains widespread with few exceptions (namely opium addicted

individuals) and religious norms ensuring loans are cost free and often with

indefinite repayment periods enable most households to manage remarkably large

debts averaging USD 2500.” The study found that a credit system had stretched

to the limit, with poorer households in particular mortgaging their land,

exhausting saleable assets and reducing consumption not just in the short-term

but for years on end.

According to the study, informal credit

systems are also highly gendered with women frequently participating in small

in-kind exchange, but access to cash remains limited. The study found “The

absence of men through work in Iran has to an extent increased women’s access

to credit, as permission to borrow is granted by husbands before departure.” Although

women are increasingly accessing credit, the study also noted that “ownership

of the loan and responsibility to repay remain with the men and women’s agency

is constrained by this as much as a lack of independent earnings and in rare

cases, household factors combined with women’s agency and ability to work

enables them to circumvent these norms to a degree.”


paper is one of eight pieces of research conducted in Afghanistan, Nepal,

Pakistan, Sri Lanka and Uganda. The study was conducted by the Afghanistan

Research and Evaluation Unit (AREU), Centre for Poverty Analysis (CEPA – Sri

Lanka), Feinstein International Center (FIC, Tufts University – Uganda), Nepal

Institute for Social and Environmental Research (NISER), Overseas Development

Institute (ODI) and the Sustainable Development Policy Institute (SDPI –


AREU is an independent research

institute based in Kabul that was established in 2002 by the assistance of the

international community in Afghanistan. AREU’s mission is to conduct

high-quality evidence-based research to inform and influence policy and

practice and to actively disseminate the results and promote a culture of research

and learning.

The post New Study Indicates a Drastic Decrease in Availability of Credit in Herat appeared first on Wadsam.

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