Attachments
Background
The collapse of the former government in August 2021 has further deepened the already vast and complex economic crisis, adding a sharp fiscal contraction and decline in demand to the collapse of state institutions and basic service provision, and a rupture in connectivity with domestic and international markets. The abrupt reduction in foreign aid, trade, and investment portended a ruinous financial state in a country where external aid previously accounted for 75 percent of public expenditures in recent years. The resulting surge in market prices, compounded by widespread unemployment and reduced purchasing power, has resulted in a drastic rise in both urban and rural poverty and increased reliance on harmful coping strategies. New restrictions imposed on women’s participation in the private and public sectors have also exacerbated inequalities and curbed national economic potential. Multiple studies indicate that Afghanistan is the worst country in the world to be a woman or girl, with the situation only deteriorating since the political takeover. The move to restrict women from work was estimated to cost the Afghanistan’s economy up to $1 billion – or five percent of its GDP – and will likely have a broader impact on poverty and humanitarian needs across the country. Within this context, the participation of women in the labor force across Afghanistan remains very low: women represent 16.5% of the overall work force and only 2.2% of Afghan firms are owned by female entrepreneurs.
According to a recent survey by the World Bank, 42 percent of women-led businesses have temporarily closed following the Taliban takeover. The same study also found a 75 percent drop in women’s employment among surveyed firms and a projected increase in women unemployment in the months to come. Pre-existing barriers to launching and growing enterprises have been amplified for women-led businesses following the restriction on women economic activities by the Taliban. These have led to increased failures of early-stage firms and continue to limit the ability of existing MSMEs to contribute to local economic recovery and employment generation. Mobility restrictions imposed on women, the ban on girls’ access to secondary and higher education, reduced access to productive inputs and finance, as well as the overall reduction in market demand for goods and services were the key reasons for women businesses’ closure. In light of these limitations, income for female-headed households has drastically reduced in recent years.
Market linkages have been weakened by decades of crisis, with assessment findings identifying insufficient access to necessary inputs, thin primary markets at the district level, limited access to market information, and a high reliance on middlemen – often a male or elderly female family member – as key constraints hindering womenowned MSMEs’ potential. In turn, DRC has identified a need for technical skills and capital to strengthen women employees and entrepreneurs’ ability to become decision-makers with regards to their livelihoods and income. Despite the challenges and uncertain future, the private sector remains as an important source and engine of growth in the country. The small and medium enterprises are necessary to produce goods and services for the local economy, create employment and wealth for the Afghan population and generate vital export earnings.