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Bribery and limited access to banking are challenges for Afghan private firms

Arvind Jain's picture

The World Bank Group’s Enterprise Surveys benchmark the business environment based on actual experiences of firms. In a new blog series we kicked off last week, we’re sharing these findings from recently analyzed surveys conducted through extensive face-to-face interviews with managers and owners of firms in several countries.
 
In this post we focus on Afghanistan. We’ve conducted a survey with 410 firms across five regions and four business sectors—manufacturing, construction, retail, and services.

The International Monetary Fund (IMF) has noted that considerable political and security uncertainties have posed challenges for Afghanistan. Furthermore, the financial sector has been vulnerable with eight out of 15 banks classified as weak in late 2014. Within this context, the Afghanistan Enterprise Surveys (ES) shed light on several interesting findings:

Corruption is a challenge

According to the Afghanistan Enterprise Survey, firms face almost a 50 percent chance of having to pay a bribe if they applied for an electricity connection, tried to obtain permits, or met with government officials for tax purposes (“Bribery incidence”).  This is more than double of what private firms in landlocked developing countries experience on average.
 

Less than half of Afghan firms have bank accounts

Moreover, firms are less likely to have bank accounts compared with those in low income and landlocked developing countries. The precipitous drop in the percentage of firms with a checking or savings account in the past six years-- from 73 percent to 44 percent-- may be a result of people having less confidence in banks after the 2010 Kabul Bank scandal.

And what are the biggest obstacles to Afghan firms?

The Afghanistan private sector considers political instability and corruption as their top obstacles. Among the list of 15 potential business environment obstacles, where respondents are asked to choose the biggest obstacle to their day-to-day operations, a quarter of all firms chose political instability.  Corruption was the second biggest obstacle, followed by access to land (13%).

For more details on the Afghanistan survey, please see the Country Highlights. The raw survey data can also be obtained here upon registration.

 This post is from a blog series that shares highlights from the Enterprise Surveys conducted in several countries. Previous postings in this series are available below:

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