What ABIF is all about

The Afghan Business Innovation Fund (ABIF) is DFID's new market development (M4P) challenge fund for Afghanistan. ABIF will manage a £4.8 million pilot fund to promote private sector innovation (new products, services and business models) in Afghanistan.

Rural and urban market systems in Afghanistan suffer from severe constraints, particularly in the areas of access to markets (particularly in remote areas), finance, information, technology and skills. These constraints have a serious impact on:

• The competitiveness of small and micro-enterprises and in turn on employment opportunities and incomes of poor people; and
• The value for money that poor people receive as customers.

To address this problem, the fund will:

• Identify the key constraints to competitiveness in sectors relevant to the poor as producers, employees or consumers;
• Encourage the development of commercially viable private sector led innovative solutions to these constraints; 
• Evaluate applications on a competitive basis; and
  
• Invest (through grants) with large and medium sized companies and specialist service providers to deliver sustainable market based solutions.

The level of ABIF's investment will be calculated to compensate for the risk of investing in innovation in Afghanistan (see post on risk based approach to challenge funds).

This project represents a significant opportunity to change the way that market systems work in Afghanistan. So much work has been done on value chain analysis and there have been countless donor interventions to address the problems that have been identified, but until now nobody has tried to use the M4P approach or the challenge fund mechanism to stimulate the creativity and harness the capacity of the private sector to deliver commercial solutions.

It will be challenging to implement this project in a country that has become so accustomed to "free" public money, but with perseverance and imagination, I sincerely hope that we can have a significant impact.