Ariana Financial Services Joint Stock Company (AFS), a partner of Mercy Corps
Approved to post Kiva loans from: Afghanistan
Update January 20, 2012
Ariana's remaining delinquent loans have been settled with Kiva, and all issues relating to this partnership are now closed.
In a previous update, dated September 24, 2011, we stated that we expected to pay into Kiva accounts the agreed settlement with ArianaFinancial Services, on October 15, 2011. The settlement payment of AFN 8,000,000 was received by Kiva, which converted at the time to USD $168,715. This settlement amount was distributed to Kiva lenders on a pro rata basis according to the amount loaned by each account. The settlement as agreed upon with Ariana is complete.
The final step of changing the status of these settled loans to "Defaulted" has taken place, and Ariana's repayment performance statistics on Kiva are now up to date. All loans that were settled in relation to the dissolution of Ariana as it was consolidated into the new microfinance institution Mutahid, are now reflected within Ariana's Default Rate listed at the bottom of this page. All affected lenders have been notified that the loan status has changed.
As mentioned in the update of September 12, 2011, Kiva is open to the possibility of a partnership with Mutahid, the new microfinance institution into which Ariana Financial Services was consolidated. If, and when, Mutahid applies for Kiva partnership, the organization will undergo the due diligence of a new microfinance institution.
Many thanks for your continued support.
October 1, 2011
In the partner page update from September 12, 2011, Kiva updated lenders about its recent recovery of funds on behalf of lenders to Ariana Financial Services (AFS) borrowers.
We've received some followup questions about the previous partner update, and in the interest of transparency are posting our answers on AFS' partner page.
1) Repayment reports
As stated previously, one of Kiva's major goals throughout this process has been to maximize recovery of lender funds. Along these lines, Kiva worked to negotiate the recovery of lender funds over a period of several months.
During this time period, Kiva turned off the settlements procedure until the situation could be assessed. Unfortunately, we failed to properly anticipate at that time that these negotiations would extend over a lengthy time period. As a result, while the settlements procedure was properly turned off, statements continued to be generated through Kiva's exceptions-based repayments reporting system. Accordingly, repayment reports based on expected repayments were automatically and inaccurately posted to AFS borrower profiles from June through September.
On September 12, 2011, Kiva announced that after negotiations with a third party, it had negotiated a "one-off settlement of AFN 8,000,000 in local currency (approximately $172,117 based on the current exchange rate) ... [that] reflect[ed] a ~58% recovery of lender funds." Kiva is crediting all lenders to AFS on a pro-rata basis, such that as the repayment is settled out to lenders, funds will be paid out to Kiva lender accounts based on the percentage of total loans outstanding.
As a result, after these funds are settled out on October 15, 2011, repayment reports should properly display the actual pro-rata distributions, and not the previously incorrectly reported borrower repayments from June through September as they had previously. Kiva is reviewing its existing policies and procedures around institutional defaults to institute a revised procedure that will help ensure that during a negotiation to recover lender funds, borrower repayments properly reflect the uncertainty inherent to a default.
2) Labeling of delinquency/default
There are currently 580 AFS loans that are marked as delinquent. The advanced repayment reports for these loans are labeled with the phrase, "Entrepreneur behind in repayment."
This label is in error, and is due to a bug in the display of Kiva's advanced repayment reports. This bug has been flagged as high priority for the Kiva team. After the label has been successfully debugged and the fix applied, the team will then do a sweep of the site to work towards making sure that delinquencies and defaults are properly labeled across the site. In other words, we will work to help ensure that if a delinquency or default is due to a field partner, then the borrower profile and advanced repayment schedule is labeled appropriately.
We will keep this page updated with further updates as information becomes available.
September 24, 2011
September 24, 2011
In the partner page update from September 12, 2011, Kiva clarified that an one-off settlement of AFN 8,000,000 in local currency (approximately $172,117 based on the exchange rate) was scheduled to occur within the next week.
After the refunds are complete, there will be $297,459 remaining in loans to AFS borrowers in the outstanding Kiva lender portfolio. After discussing the matter, Mutahid and Kiva have agreed to settle the outstanding Kiva lender portfolio through a one-off settlement of AFN 8,000,000 in local currency (approximately $172,117 based on the current exchange rate). This settlement would reflect a ~58% recovery of lender funds, and is scheduled to occur within the next week. Because of the uncertainty around the situation and the nature of the settlement, Kiva has made the decision to credit all lenders to AFS on a pro-rata basis: as repayments come in, funds will paid out to Kiva lender accounts based on the percentage of total loans outstanding.
Due to technical limitations however, these recovered lender funds won't be able to settle out to lenders until October 15th, 2011. As a result, the date of the scheduled settlement will be delayed beyond the originally scheduled timeframe of this week.
Kiva is reviewing its existing policies and procedures around recovered lender funds to institute a revised procedure that will help insure that lender communications are more likely to properly reflect the date that funds are scheduled to settle out to lenders.
We will keep this page updated with further updates as information becomes available.
September 12, 2011
Ariana Financial Services (AFS) has been a partner of Kiva's for fifty-five months, successfully paying back $1,329,500 in loans since the partnership began in January of 2007.
We have recently received notice from AFS that it has suspended its operations due to a number of factors, including viability as an on-going entity. As a result, MISFA (Microfinance Investment Support Facility for Afghanistan), as the primary creditor to AFS and in its role as a support facility for microfinance institutions in Afghanistan, has agreed to include AFS in a sector-wide consolidation of non-viable MFIs. This consolidated entity will be called Mutahid, which in local Afghan languages means “united".
Shortly after we first heard from AFS on this matter, Kiva turned off the settlements procedure until the situation could be assessed. This was done as a precaution in the event we needed to refund loans to lenders who had lent new funds after Kiva had first been apprised of the facts, but had yet to make a decision on how to proceed.
Kiva has been informed that AFS's loan portfolio, including outstanding Kiva loans, will be moved into the Mutahid loan portfolio where they will be serviced by Mutahid loan officers, some of whom were absorbed from AFS. Kiva staff has spoken to Mutahid about the transition in the loan portfolio. Mutahid has conveyed that AFS's loan portfolio has developed significant delinquencies that aren't currently reflected in the delinquency rate as expressed on the Kiva website. In addition, it's currently unknown how the transition of AFS's loan portfolio will impact collections of AFS's borrower repayments.
One of Kiva's major goals throughout this process was to maximize recovery of lender funds, especially given the uncertainty of the transition of AFS's loan portfolio. After joint discussions on the matter, Mutahid and Kiva agreed that the best solution was to negotiate an immediate one-time payment to settle the outstanding Kiva lender portfolio.
The current value of Kiva-funded loans in AFS's portfolio is $349,592. Of this total, $52,133 of the loans included funds that had been loaned after we first heard from AFS on this matter, or loans that had been fully funded when we first heard from AFS but whose funds we hadn't settled out through net billing yet. These loans are now being refunded to Kiva lenders. This is being done for two reasons. First, because at the time some of these lenders made these loans, they did not have the same information on AFS's portfolio as Kiva itself had; also, because Kiva could not justify sending lender funds to a partner where there was a significant amount of uncertainty around the likelihood of repayments.
After the refunds are complete, there will be $297,459 remaining in loans to AFS borrowers in the outstanding Kiva lender portfolio. After discussing the matter, Mutahid and Kiva have agreed to settle the outstanding Kiva lender portfolio through a one-off settlement of AFN 8,000,000 in local currency (approximately $172,117 based on the current exchange rate). This settlement would reflect a ~58% recovery of lender funds, and is scheduled to occur within the next week. Because of the uncertainty around the situation and the nature of the settlement, Kiva has made the decision to credit all lenders to AFS on a pro-rata basis: as repayments come in, funds will paid out to Kiva lender accounts based on the percentage of total loans outstanding.
The new microfinance institution, Mutahid, has expressed interest in a partnership with Kiva in the future. As with all new field partner applicants, this would require a new due diligence process. We remain open to this possibility.
We'd like to thank Kiva lenders for their support of AFS borrowers over the last 53 months. $1,935,100 has been raised for AFS borrowers with the help of the Kiva community. Many thanks for your continued support.
History:
Ariana Financial Services, Joint Stock Company (AFS) began operations as a program of Mercy Corps in May 2003 with an initial grant from the Bill & Melinda Gates Foundation. Early operations were focused exclusively on women in District 7 of Kabul province, the area hardest hit by fighting during the war.
The initial success of AFS led MC to submit a proposal to the World Bank for the expansion of operations and funding under the Microfinance Investment and Support Facility for Afghanistan (MISFA). The proposal was approved and the first contract was signed between Mercy Corps and MISFA in October 2003 and a second contract was signed in February 2004. The third contract, for 3 years, was signed between AFS / MC and MISFA/ MRRD in June 2006 and the fourth contract for 2 years amounted $ 9 million, was signed between AFS and MISFA Ltd in Dec 2008.
Since its inception in May 2003, AFS has disbursed 54,868 loans for a total of $18 million. Today (May 2010) AFS offers group solidarity and individual loan products to both female and male clients throughout the 18 Districts of Kabul City as well as agricultural loans through out its branch in Nengarhar province. AFS also opened a new branch in Mazar-e-Sharif in Sept. 2009. By the end of Feb 2010 AFS had 7,835 active clients with an outstanding portfolio of AFN 143million ($2.86mln). Like most MFIs in Afghanistan, maintaining portfolio quality has been a challenge. Although AFS’ PAR is high by international standards, PAR>30 days of 14% as of Feb, 2010 it is commendable in the local context. Women comprise 62% of clients, down from 100% in 2003 as AFS has introduced individual loan products which attract male clients. As of Feb. 2010 the loan portfolio by client business is 63% trade and services, 29% agriculture and livestock and 10% manufacturing and handicrafts.
Vision:
To be a sustainable, nationally recognized financial services institution whose activities are targeted toward reducing poverty and generating employment in Afghanistan.
Mission:
To create a nationally recognized sustainable financial services institution, providing high quality and fair priced loan products in a transparent and sustainable manner to the economically active poor which will increase their incomes, expand their businesses and improve their quality of life.
AFS’s Current products and their feature:
Group Loan
Loan size: 10,000– 75,000 AFN
Loan Term: 3-18 months
Interest Rate, other charges, frequency and calculation: 2% flat monthly
Repayment Frequency: Monthly
Collateral: Group guarantee
Individual Loan
Loan size: 30,000– 150,000
Loan Term: 6-18 months
Interest Rate, other charges, frequency and calculation: 2% declining monthly AFN 200 disbursement fee
Repayment Frequency: Monthly
Collateral: Reliable person, house deed
Agro Loan
Loan Size: 30,000– 392,000 AFN
Loan Term: Up to 3 yrs, incl 3 months grace
Interest Rate, other charges and calculation method: 1% flat monthly, AFN 200 disbursement fee/loan cycle
Repayment Frequency: Monthly
Collateral: Reliable person, house deed
Seasonal Agro Loan
Loan Size: AFN 20,000- 50,000
Loan Term: Up to 12 months, including 6 month grace
Interest Rate, Other charges and Calculation method: 1.5% flat monthly, AFN 200 disbursement fee/ Loan cycle
Repayment Frequency: Monthly
Collateral: Group Guarantee
Murahbaha
Loan Size: AFN 50,000-500,000
Loan Term: 6-18 months
Interest Rate, other charges and Calculation method: 6 months- 10 %( cost plus) 12 months-20 %( cost plus)18 months-30 %( cost plus)
Repayment Frequency: Monthly
Collateral: Reliable person
Ariana Financial Services can be contacted via email at ssadat@afs.org.af and mwaissi@afs.org.af
Repayment Performance on Kiva
| This Lending Partner | All Kiva Partners | ||
| Start Date On Kiva | Jan 18, 2007 | Oct 12, 2005 | |
|---|---|---|---|
| Total Loans | $1,885,250 | $2,049,944,590 | |
| Amount of raised Inactive loans | $0 | $326,775 | |
| Number of raised Inactive loans | 0 | 217 | |
| Amount of Paying Back Loans | $0 | $154,483,535 | |
| Number of Paying Back Loans | 0 | 184,578 | |
| Amount of Ended Loans | $1,885,250 | $1,852,981,325 | |
| Number of Ended Loans | 2,262 | 2,497,887 | |
| Delinquency Rate | 0.00% | 11.62% | |
| Amount in Arrears | $0 | $10,816,652 | |
| Outstanding Portfolio | ($22) | $93,048,814 | |
| Number of Loans Delinquent | 0 | 37,922 | |
| Default Rate | 6.83% | 1.82% | |
| Amount of Ended Loans Defaulted | $128,766 | $33,758,037 | |
| Number of Ended Loans Defaulted | 580 | 89,054 | |
| Currency Exchange Loss Rate | 0.00% | 0.47% | |
| Amount of Currency Exchange Loss | $0 | $12,742,203 | |
| Refund Rate | 3.64% | 0.53% | |
| Amount of Refunded Loans | $68,700 | $10,938,345 | |
| Number of Refunded Loans | 73 | 9,670 |
Loan Characteristics On Kiva
| This Lending Partner | All Kiva Partners | ||
| Loans to Women Borrowers | 47.66% | 78.48% | |
|---|---|---|---|
| Average Loan Size | $374 | $393 | |
| Average Individual Loan Size | $803 | $585 | |
| Average Group Loan Size | $873 | $1,911 | |
| Average number of borrowers per group | 3.6 | 8.3 | |
| Average GDP per capita (PPP) in local country | $1,100 | $5,592 | |
| Average Loan Size / GDP per capita (PPP) | 33.99% | 7.02% | |
| Average Time to Fund a Loan | 1.07 days | 9.12 days | |
| Average Dollars Raised Per Day Per Loan | $349.72 | $43.08 | |
| Average Loan Term | 11.36 months | 11.5 months |
Journaling Performance on Kiva
| This Lending Partner | All Kiva Partners | ||
| Total Journals | 2,731 | 1,222,220 | |
|---|---|---|---|
| Journaling Rate | 99.96% | 41.91% | |
| Average Number of Comments Per Journal | 0.19 | 0.02 | |
| Average Number of Recommendations Per Journal | 12.50 | 0.55 |
Borrowing Cost Comparison (based on 2009 data)
| This Lending Partner | Median for MFI's in Country | All Kiva Partners | ||
| Average Cost to Borrower | N/A | 40.00% PY | 26.44% PY | |
|---|---|---|---|---|
| Profitability (return on assets) | N/A | -15.7% | -1.33% | |
| Average Loan Size (% of per capita income) | N/A | 98.00% | 0.00% |
Country Fast Facts
- Country:
- Afghanistan
- Capital:
- Kabul
- Official Language:
- Afghan Persian or Dari (official) 50%, Pashto (official) 35%
- Population:
- 31,822,848
- Avg Annual Income:
- $1,100
- Labor Force:
- agriculture 78.6%, industry 5.7%, services 15.7%
- Population Below Poverty Line:
- 36.00%
- Literacy Rate:
- 28%
- Infant Mortality Rate (per 1000):
- 117.23 deaths
- Life Expectancy:
- 50.49 years