Financial Crime World

Financial Inclusion in Afghanistan: A Challenge Amidst Risk of Financial Crime

Introduction

Kabul, Afghanistan - The country is struggling with a significant issue of financial exclusion, with nearly 85 percent of adults unbanked. This lack of access to financial services and high costs has made it difficult for people to join the formal financial sector, posing a risk of financial crime.

Factors Contributing to Financial Exclusion

• Security concerns • Religious and cultural beliefs • Lack of trust in the financial sector • Low rates of financial literacy

Women are particularly affected, with only 7 percent owning an account compared to 23 percent for men. This highlights the need for targeted efforts to increase financial inclusion among women.

National Financial Inclusion Strategy (NFIS)

In September 2019, the central bank, Da Afghanistan Bank (DAB), launched its first NFIS with technical assistance from the World Bank. The strategy aims to:

  • Promote greater financial inclusion
  • Contribute to the nation’s economic growth and overall welfare

The NFIS involves several initiatives, including:

• Establishment of a Financial Inclusion Department within DAB • Financial Inclusion Taskforce • National Committee for Financial Inclusion (bringing together over 20 stakeholders from government agencies, financial services providers, non-governmental organizations, and international organizations)

Goals of the NFIS

  • Reduce financial exclusion in Afghanistan by close to 15 percent within the next four years
  • Expand and diversify access points
  • Enhance Micro, Small, and Medium-sized Enterprises’ (MSMEs) access to finance
  • Improve agriculture sector’s access to finance
  • Establish a robust financial consumer empowerment and protection framework
  • Promote access to digital financial services

Expected Outcomes

• The percentage of Afghan adults owning bank accounts is expected to double within the next five years • Special efforts will be made to increase account ownership among Afghan women, aiming to reach 27 percent by 2024

Challenges and Opportunities

The successful implementation of NFIS depends on proper coordination between public and private stakeholders as well as their commitment towards implementing the strategy. DAB is fully committed to a successful implementation.

However, experts warn that the risk of financial crime remains a major concern, particularly with the increasing use of digital financial services. Therefore, it is essential for the government and financial institutions to ensure that these services are secure and regulated effectively to prevent financial fraud and other illicit activities.

Conclusion

As Afghanistan works towards achieving greater financial inclusion, it must also prioritize the prevention of financial crime to protect its citizens and promote economic stability. The successful implementation of NFIS will require a coordinated effort between stakeholders, and the government’s commitment to addressing the risks associated with digital financial services is crucial for the strategy’s success.