Inside Afghanistan’s private sector: Insights from new Enterprise Survey data

New results from the latest World Bank Group Enterprise Survey in Afghanistan indicate that, despite prolonged instability and a challenging operating environment, formal private-sector firms are demonstrating resilience and continued investment—pointing to a cautiously optimistic outlook for the sector’s future.

Investing in people, even when times are hard

One of the most encouraging findings is the commitment of firms to their workforce. More than one in three firms (35.2 percent) report investing in formal training for employees, a figure that stands well above both the regional average (22 percent) and the average for low-income countries (27 percent). In contexts marked by uncertainty, training is often among the first expenditures firms cut; it requires upfront cost with delayed and uncertain returns. That Afghan firms are instead investing in skills suggests forward-looking behavior and confidence in the returns to human capital—even under fragile conditions.

Figure 1. Afghan firms invest in skills despite constraints

Persistent growth

The data also point to strong firm performance. On average, firms report sales growth of 21 percent and employment growth of 13 percent, signaling continued economic activity and job creation, well above regional averages of 4 percent and 6 percent respectively. These rates partly reflect recovery from the 2021/2022 contraction rather than growth beyond pre-crisis levels, but they nonetheless indicate meaningful rebound among formal enterprises.

Figure 2. Afghan firms expand sales and jobs

Constraints still bind—especially finance and infrastructure

These positive developments, however, are playing out in the context of serious and persistent constraints. Access to finance remains the number one obstacle cited by both small and large firms, underscoring long-standing gaps in financial intermediation.

The scale of financial exclusion is stark. Afghan firms finance just 0.28 percent of their investments through banks—compared to 9.8 percent in the MENA region and 6.3 percent in low-income countries. For working capital, the picture is similarly bleak: banks provide less than 1 percent of financing, versus 8.5 percent regionally. These figures have actually deteriorated since 2014, when bank-financed investment stood at 1.5 percent.

Figure 3. Limited bank credit to Afghan firms

The data also reveal a substantial gender gap in financial access. Women-led firms are twice as likely to be fully credit constrained (32 percent versus 16 percent) and face loan rejection rates nearly double those of male-led firms. Yet these same firms are far more likely to report needing credit in the first place.

Figure 4. Significant gender gap in bank credit 

Infrastructure weaknesses compound these challenges. Electricity—its instability and inefficiency—ranks among the most severe obstacles with 44 percent of firms identifying it as a major or very severe constraint—well above the global average of 29 percent. Outages remain frequent, on average 13 times per month, and firms lose an estimated 6 percent of annual sales to disruptions. Sixty percent now own or share generators, more than double the regional average and up from 48 percent in 2014. For these firms, over a third of electricity comes from self-generation. This private investment in substitute infrastructure reflects entrepreneurial resilience, but it also represents a hidden cost: fuel, maintenance, and capital expenditure.

These trends highlight areas where policy action is urgently needed to prevent momentum from stalling.

A cautiously optimistic outlook

It is important to recognize that today’s positive signals emerge from a trough and follow a prolonged period of economic and institutional stress. Yet that is precisely what makes them meaningful. Firms are not merely surviving—they are investing and growing.

The new Enterprise Survey data send a clear message: Afghanistan’s private sector remains resilient. With improvements in access to finance, infrastructure reliability, and regulatory efficiency, this resilience could translate into more sustained and inclusive growth. The data remind us that even under severe constraints, economic actors adapt—and where they do, opportunity follows.