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On borrowed time: The limits of informal credit for livelihood security in Herat, Afghanistan

Tom Shaw and Ihsanullah Ghafoori

Type: Working Paper

Organisation: Afghanistan Research and Evaluation Unit (AREU)

Country: Afghanistan

Date: 05/03/2019

Full summary

Informal credit has been consistently highlighted in ten years of livelihoods research at the Afghanistan Research and Evaluation Unit (AREU), the Secure Livelihoods Research Consortium (SLRC) and the Overseas Development Institute (ODI) as a primary source of social protection – and one of the most pervasive social structures – in Afghanistan.


However, there is little recognition or understanding of informal credit in policy-making and programming. Within Afghanistan’s deeply socially embedded economy, informal credit is a key mechanism through which markets operate and through which the distributional economy provides access to land, labour and income for rural households.


This study undertakes an in-depth examination of informal credit practices in two villages in Herat that differ in size and economy, exploring how credit operates. In particular, it looks at the ways in which credit is used and negotiated, its interaction with livelihood churning, how credit mechanisms are gendered and the extent to which social relations are underpinned by informal credit.


Key findings

Gender and credit: Informal credit systems are also highly gendered. Women frequently participate in small in-kind exchange but access to cash remains limited.


The social aspect of credit: Despite sympathetic lending terms, credit carries with it enormous anxiety for households, not least because what is at stake is not only money but reputation and an infinitely more valuable resource – social connections.


Credit and livelihoods: Informal credit systems appear largely responsible for protecting against livelihood churning and instability, offering an unrivaled safety net for households that is deeply rooted in familial and kinship ties.


Credit in context: The report ends by framing informal credit within the wider economic and institutional context, particularly in terms of the urgent need to create opportunities for Afghanistan’s surplus rural labour force and to meet the needs of migrants to and returnees from Iran.

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