Despite Threats, Afghanistan CU Founder Upbeat

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GLASGOW, Scotland-For the first time ever at a World Council of Credit Unions event, the flag of Afghanistan stood with the flags of the other 54 nations whose members are represented by the group when WOCCU hosted its annual World CU Conference here.

The person heading up Afghanistan's fledgling CU movement told the meeting they can expect to see and hear much more from the country's credit unions in the years and decade ahead, and clamed reports of violence in the country are exaggerated.

Mahir Momand, CEO of Islamic Investment and Financial Cooperatives Group (IIFC Group), said the Afghanistan's economy is booming, and that by adhering to Muslim laws, credit unions have been able to flourish and have even helped to create 300,000 jobs.

But the first issue Momand wanted to address is perceptions of his country. "People associate Afghanistan and terrorism, which for me as an Afghan is very hard to take. Those perceptions are there, but the things people are seeing in the media are just a small part of what is happening there," he said, stressing that in both the case of the former Soviet Union's invasion of Afghanistan and the Taliban's takeover of the government, the problems were "imported into our borders."

Still, those problems have left much of Afghanistan's economic system in a shambles, but Momand said the "world's youngest and newest credit union movement" is playing a critical role in helping to rebuild.

"The international presence in Afghanistan has brought good and bad. There have been 45 countries that have provided help and support," said Momand. "We thank you who are paying taxes to your governments, and your taxes are coming to Afghanistan. There are close to five-million girls in school today; at the time of the Taliban there were none. Many schools and hospitals have been built. Things are moving in a very positive direction."

Still, Momand said he is "very concerned" that the international community will withdraw after 2014, which could lead to a "big disaster. We are all part of the same humanity."

The Need For Contextualization
To make credit unions work in Afghanistan, explained Momand, has required "contextualization." The reason, he said, is he has seen in other places where credit unions have been imported, such as Africa, and the CU model wasn't changed to fit local needs and cultures. In Afghanistan, that has meant complying with Muslim laws. Microfinance in Afghanistan, said Momand, is now a $1 billion industry.

The average IIFC in Afghanistan has 2,600 members, average assets of $750,000, and averages between 10 and 15 employees. Most of the 30 IIFCs, which serve 73,000 members and have cumulative assets of $54 million, are based in rural communities. Momand said the IIFCs are projecting they will be sustainable within three years, with no long-term dependency on donors.

Momand shared a CU model in Afghanistan that will remind many of the early days of CUs in the U.S. The IIFCs only make loans to those people approved by local village and religious leaders, including the local Jirgas, or councils of elders. When a member is behind on payments, "we go to the community leader and we say 'We made a loan to this person because you said he would repay. Now he is not. What can you do?'"

Momand showed a photo of the chairman of one local IIFCU, as the credit unions are called, who was about to go out and do collections. He said repayment rates average about 90%, which is far better than the 60% to 70% of other lenders.

Part of that "contextualization" needed to make the IIFCs work was to be compliant with Islamic law, which forbids the charging of interest. The IIFCs have obtained letters from religious scholars in each area where they do business in order to demonstrate they are compliant.

To get around the prohibition on interest, the IIFCs go with the member to the retailer and purchase the goods on the member's behalf. The member then buys the goods from the IIFC at a slight margin. Moreover, it does not require a photo ID for women who are not allowed to show their faces.

In addition, when the IIFC turns a profit at least 30% of those fund are returned to the community for various projects, according to Momand, who said that three attempts by the Taliban to destroy a credit union were turned away by local community members.

While Momand downplayed the dangers in Afghanistan, he acknowledged that he has had threats made on his life by the Taliban and has traveled with up to eight bodyguards while using two cars. He said his name remains on a list that includes several other people, one of who has already been killed. He said in some cases when electricity hasn't been reliable, IIFC staff have delivered data to the main office using flash drives that were hidden in the engine compartment, in the event they were stopped by the Taliban.

The IIFCs in Afghanistan have also created a process to regulate themselves. Momand's office reviews data from all the IIFCs on a weekly basis.

"We have had many challenges, but we have tried to find a solution to each," said Momand.

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