Crimson Capital News Details

June, 2013

Afghanistan: Launch of Purchase Order Finance (POF) for SMEs

As part of the USAID-funded Financial Access for Investing in the Development of Afghanistan (FAIDA) project, Crimson experts have successfully assisted financial institution partners to introduce Purchase Order Finance (POF) to the market. POF is a type of trade finance that provides short-term working capital to businesses based on a verified purchase order or contract. It is one of the single most effective financial instruments for rapidly increasing competitiveness, sales and employment.

The Crimson team assisted three selected financial institution partners (Afghan Rural Finance Company, Afghan International Bank and Azizi Bank) to develop, market and launch POF Crimson-FAIDA assistance included strategic planning with bank management, extensive hands on credit training of a cadre 39 bank staff, assistance in developing POF credit policies and procedures and development of a POF marketing plan. In just four months, partner banks issued over $1.25 million in POF loans to SME clients and are continuing to make POF loans to SME clients on an on-going and sustainable basis. To date, this represents a leverage of USAID funds to private sector funds of more than 10 times over.

"The training and assistance provided by Crimson-FAIDA experts was extremely valuable to us in implementing this new type of lending [POF] and specifically in structuring loans using non-traditional types of collateral. This will dramatically increase access to finance for Afghan SMEs" Ahmed Khalil Habibi, Credit Manager of Azizi Bank.