It is widely believed that there is a strong demand for credit in Afghanistan and that much of this demand is unmet, justifying a major programme in microcredit provision. But there is very little understanding of the extent and the workings of informal credit systems, particularly outside opium poppy growing areas.This paper, based on a detailed anthropological study of informal credit practices, addresses this gap.
Drawing from a detailed case study of eight households in three villages - Heart, Ghor and Kapisa - and amplified with additional case material, the study concludes that:
- informal credit practices are widespread with most households both giving and taking credit, having multiple outstanding debts simultaneously and a variety of different households with whom they exchange credit.
- there is great diversity in informal credit practices, the meanings of which have to be understood according to social context. A large proportion of these credit transactions are on a no-interest basis.
- informal credit is almost exclusively used for either consumption smoothing or marriage with very little being deployed for investment in enterprises.
- the reasons for entering into informal credit relations are diverse but include investment in social networks for informal security, for providing assistance as well as maintaining or consolidating patron client relations.
- a majority of households are able to access credit and have confidence that they will be able to do so.repayment practices are usually highly flexible and negotiable.
- for many of the households informal credit has positive outcomes in achieving immediate welfare goals.
This, however, is not universal and the dynamics and characteristics of informal credit are changing over time. The methods used in this study have highlighted the complexity of informal credit and question the application of models of formal credit to informal credit. Notions of debt, interest rates and contractual periods, for example carry very different meanings from those that formal credit assume.
