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MED Afghan

Microenterprise Development in Afghanistan

Brian Downing

on 27 April 2010

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Transcript of MED Afghan

Microenterprise Development "any activity undertaken by donors, host-country governments, or non-government organizations to improve the lives of poor people by encouraging the formation and/or improved profitability of micro- and small enterprises” (SEEP 2009) Brian Downing
Sean Slattery Competing with Insurgency "...what a successful insurgency does in institutional or process terms is to change the incentives and constraints facing others, as well as the incentives and constraints facing themselves and their successors." (Sowell 1990, xi) Conflict Drives Poverty
* infrastructure improvements
* access to credit (including micro credit)
* building human capital (alternative livelihoods and training)
* enhancing and supporting capital and product markets
* improved local governance Violent conflict impedes development by disrupting economic activities, displacing populations, destroying infrastructure, and weakening institutions, which combine to lower an individual's incentive to invest in specialization. Structural poverty may have its roots in:
poor macro-economic policy
poor governance
low human capital
poor infrastructure Conflict-driven poverty expands when:
existing economic livelihoods collapse
violence disrupts markets and trade
people flee violent areas
security of property rights erodes
Perfume for Poppies Microenterprise development offers a suite of tools to address poverty, and create conditions for economic growth.
These include: Enabling Microenterprise Development
A Policy Prescription Provide access to credit, especially for small business owners and agricultural producers.
Guarantee a price floor for the advance purchase of crops through a facility (such as an Agricultural Board).
Attract businesses through an economic development board or reconstruction agency and nurture value chains and market linkages.
Support vocational training, including the identification of apprenticeship opportunities in certain industries including oil, gas, marble and other minerals production.
Provide insurance, including crop insurance for farmers.
Support branding. A “Made in Afghanistan” brand, for instance, has sales potential. (Fick 2010, 6) MED in Afghanistan Changing Incentives Led to Localized Reduction of Opium Production in Badakhshan Higher returns and greater security of income in licit activities drove this shift. Essentially, the combination of high-value cash crops with higher livestock prices and the growth of the labor market with attractive wages meant that farmers could get higher returns than if they grew opium.
They could also achieve greater security of income, given the risks of opium cultivation. Essentially, the growth of markets for licit produce changed the economics. There were several contingent and highly localized factors that aided this shift.
First, the high labor demand of opium was a key factor, as the local opportunity cost of labor rose.
Second, traders for alternative crops offered similar financing and marketing arrangements to opium to reduce market risk.
Third, past engagement with opium has allowed farmers to restock herds, which paid off with the revival of the livestock economy. The increase in herds has led to an increase in demand for fodder crops and wheat (for the straw), thereby further displacing opium poppy. Dairy production also proved profitable The provision of public goods and services also helped. The economic incentives described above combined with improved availability of public goods and services and increased physical security.
Taken together, these incentives encouraged farmers to switch out of opium, and the switch may well be permanent if these conditions are consolidated. In remoter areas of the province, farmers continued to grow opium. In remoter areas of Barak and Jurm, many farmers continued to grow opium. Essentially these are poor mountain economies with very small farms and scarce water. Cash cropping is limited. Poor roads and transport prevent a shift to high-value horticultural production. In this area, the classic drivers keep poor farmers in the opium economy. Background Literature
on MED Market Development Programs in Conflict Areas
Viable livelihood generation
Reintegration of combatants into society
Infrastructure construction and repair
Increase investor confidence

Conventional Market Development Programs
Business plan training
Financial education
Market assessment research
Value chain analysis
World Bank IMF NGO's Universities can aggregate research for actors with boots on the ground. USAID DFID (UK) Charities Good Research Exists... United Nations ...But Needs Synthesis... Military Leaders SEEP Economic Theory Our Goal: Provide MCIA with high quality research
that synthesizes rational economic theory,
empirical case studies, and expert analysis on
microenterprise development in conflict zones. What are the rules governing exchange? How can I be sure they'll be enforced? Microenterprise development in conflict areas
aims to competively challenge the institutional
incentives and constraints imposed by insurgents. Violence must be constrained and property rights reliably established in order to decrease the marginal costs and increase the marginal benefits of investment (North, 1990) Sparking Economic Growth An Analysis of Microenterprise Development Initiatives
Post-Conflict Microenterprise Development Post-conflict reconstruction requires a broad spectrum of individuals, organizations, and institutions to coordinate their efforts on the common goal of a peaceful, productive society. (Easterly, 2006) Economic Growth Specialization in Production Diverse Production of Goods Access to Larger Markets may Yield
Larger Individual & Social Returns Changes to Approach
More frequent, shallower market assessments
Flexible, bottom up, ad-hoc approach to problem solving
Limited participation, by peers and clients
Greater use of subsidies to confront high operations costs
Focused interventions help avoid mission creep

Alternative Livelihoods Program -Southern Region USAID program that provides skills training, capital, and infrastructure development to improve agricultural practices in Kandahar and Helmund. Restoration of irrigation systems, orchards, vineyards and agricultural processing facilities.
Building market strength and resiliency by increasing
interpersonal interaction between traders, entrepreneurs
and service providers.
Principle of Comparative Advantage Principle of Varied Preferences Case Study: lowers transactions costs associated
with interpersonal risk functional infrastructure can mitigate
some environmental risk Case Study: IFC PEP-MENA Progam designed to increase grape,
melon and pomegranate production in Kandahar, by
providing agricultural support and training. The Green Raisin Project Trained farmers on use of new practices and equipment
Raised quality of production with product development efforts
Connected farmers and traders with export markets
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