The Afghanistan Rural Enterprise Development Project (AREDP) will enhance participation of the rural poor in economic activities by providing business development services, improving their access to finance, and strengthening market linkages and value chains.

Around 75 percent of Afghans live in rural areas where agriculture is the primary source of income. However, poor governance, inadequate marketing infrastructure and business development services, and poor post-harvest practices are limiting the economic development potential of the agriculture sector. In addition, lack of access to finance and business know-how is hampering the sector's development and restricting on-farm and non-farm employment opportunities, thus perpetuating poverty in the rural areas.

The project will support the establishment of 13,000 Savings Groups, 6,500 Enterprise Groups (EGs) and 1,300 Village and Savings Loan Associations. The EGs will help maximize the economic potential of rural entrepreneurs to improve market access, deliver technical knowledge, raise basic business skills and leverage economies of scale to increase the value of their sales. The project will also work with around 750 Small and Medium Enterprises (SMEs) which are likely to be key drivers of rural employment. It will support SMEs in building necessary skills, promoting market development and particularly encouraging business linkages into the rural economy.

“The project will assist these institutions to build their own capacities, increase the value of trading, ensure production is oriented towards identified market opportunities, and create access to credit,” said Qazi Azmat Isa, World Bank Senior Rural Development Specialist and Project Team Leader. “The pilot phase of this program demonstrated that such an intervention can have an enormous impact in terms of improving employment opportunities and income of rural men and women. We have also seen in many other countries - in South Asia and beyond - that promoting synergies between private companies and rural enterprises provides a powerful force for boosting rural incomes.”

AREDP will be implemented under the overall leadership of Ministry of Rural Rehabilitation and Development (MRRD). With the initial $87.3 million budget envelope, the program will initially rolled-out in seven provinces (Kapisa, Balkh, Nanagahar, Herat, Bamyan, Kandahar and Helmand). It will later be scaled-up, with additional funds, to all 34 provinces of the country. In addition to IDA's $30 million grant, the UK's Department for International Development (DFID) has pledged £12 million through the Afghanistan Reconstruction Trust Fund (ARTF) for the initial rollout. The Danish Government has also committed $2 million under a bilateral agreement. The remaining funding requirements will be met through the ARTF.