Afghanistan Business Innovation Fund (ABIF)

The Afghanistan Business Innovation Fund has driven sustainable economic development by collaborating with entrepreneurs, through its incorporation of a ‘making markets work for the poor’ (M4P) approach within a challenge fund mechanism. The pilot project provided a financial return to grant recipients, whilst also leading to poverty reduction at scale.

ABIF recognised that in order to change the income inequality that had been created by donor driven economic growth, private sector investment was needed. At the time, only a select group of sectors such as construction and transportation had been developed under donor support. This development had in turn benefited a relatively small proportion of Afghans. Other issues of national importance that Afghanistan was facing included declining donor assistance and limited foreign investors: due to 40 years of conflict, few donors were willing to invest in an insecure and uncertain environment.

To change the economic situation, Landell Mills designed and implemented a private sector challenge fund. The fund encouraged the private sector to conceptualise, develop and implement their own pro-poor and innovative investment projects. The grantees were the vehicle to introduce new goods, services or jobs into the market, and the beneficiaries were Afghans who directly benefitted from investments.

The three following overarching principles guided the project: the commercial sustainability of business investments made by grantees; the likelihood of the positive impact of investments on target beneficiaries; and the transparency of the award process. ABIF identified sectors where investments were anticipated to benefit the greatest number of people possible. The sectors chosen were healthcare services, agriculture and horticulture, livestock, the carpet industry, furniture production and carpentry, and mining services.

ABIF exceeded expectations, and was able to work effectively in a challenging and insecure environment. The provision of an ABIF grant helped grantees obtain commercial or external financing which would have proved difficult to source elsewhere. Grants of £3 million were awarded, which in turn generated investments of £7.6 million. Over 280,000 poor Afghans benefitted in their capacity as producers, workers or consumers. The projects also reached beneficiaries with valuable products and services.

ABIF improved market access, increased skills and knowledge, and incentivised the introduction of new technologies. The sectors with the highest number of beneficiaries were projects related to agriculture and horticulture, livestock, and healthcare services: the greatest proportion of ABIF projects were also located in the horticulture and livestock sectors. Several of the most successful ABIF projects sourced raw materials from a wide geographical area. This is notable because it is often challenging for donor projects to operate in rural areas due to security issues.