Includes special features of this country’s banking system and rules/laws that might impact U.S. business.
Last Published: 5/28/2016
As November of 2014 , the banking system—comprising  fifteen  fully licensed commercial banks and three  branches of foreign banks with about 390 bank branches throughout the country—had assets of $4.17  billion total, deposits of $3.7 billion and an average loan-to-deposit ratio of18.78  percent.  There are three state banks: Bank-e Millie Afghan (Afghan National Bank), Pashtany Bank, and New Kabul Bank (formerly the privately owned Kabul Bank), and there are also branch offices of foreign banks, including Alfalah Bank (Pakistan), National Bank of Pakistan, Habib Bank of Pakistan..
 
Despite the boom in banking, most Afghans remain “unbanked,” with only a small percentage of Afghans currently holding bank deposits.  Moreover, many Afghans continue to rely on money service providers (or hawalas) to access finance and transfer money, due to the unfamiliarity with a functioning banking system and limited access to banks in rural areas.  Banking remains highly centralized, with 75 percent of total loans made in Kabul Province.  Bank lending is also undermined by a deficient legal and regulatory infrastructure that impedes the enforcement of property rights and development of collateral.  The difficulty of accessing credit through banks and other formal financial institutions makes existing firms dependent on family funds and retained earnings, limits opportunities for entrepreneurialism, and reinforces dependence on the informal credit market.
 
Although credit to the private sector increased in 2013 for the first time since the Kabul Bank crisis, part of the increase reflected valuation changes on foreign exchange denominated loans and credit growth over the past few years has been low.  The low level of private credit—equivalent to only 4 percent of GDP—reflects the scarcity of profitable lending opportunities, given limited information available on potential borrowers and the difficulty in realizing collateral or collecting loans from delinquent borrowers, rather than low supply of funds.  Afghanistan ranks 89th out of 189 countries for obtaining credit in the World Bank's 2014  "Doing Business Report.”  In response to this situation, investment funds, leasing, micro-financing, and SME-financing companies have begun to enter the market.
 
Afghanistan has a no public debt market, though the Central Bank issues Afghani-denominated Capital Notes with maturities of one, six, and twelve months.  Licensed commercial banks, money service providers, and foreign exchange dealers are eligible to participate in the primary auction of these securities and the Central Bank is currently working on a plan to encourage development of a secondary market for Capital Notes.
 
The Central Bank, has taken important steps to improve banking regulation and supervision in recent years.  However, serious challenges remain, including lack of capacity, limited operational transparency, a weak legal framework, and further need for improvements in supervision.  The Central Bank is now conducting both on- and off-site supervision of all 15 commercial banks.  Most bank loans have traditionally been structured as lines of credit rather than term loans, which tends to obscure the true level of non-performing loans.

Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.



Afghanistan Market Access Banks