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Interest Rate Cut In Place, Says Central Bank

The Central Bank (Da Afghanistan Bank) said this week that the average interest rate cut phased in at the start of this solar year has finally been rolled out throughout the country. 

Central Bank officials said the interest rate cut, which was launched at the end of March last year, should now be adhered to by all banks across Afghanistan.

They said this move to cut the average interest rate had been made in order to help boost investment and improve economic growth.

Khalil Sediqi the Central Bank chairman said interest on loans dropped from 13 percent to 12.2 percent this solar year.

He said, in addition to reducing the average interest rate, loan guarantees have been simplified, and loan repayment periods have been adjusted from three years to either five or seven years.

“The average rate charged by the banks is 11.02 percent. This average was 13.17 percent in fiscal year 2016,” said Sediqi.

The Association of Industrialists meanwhile welcomed the lower interest rate and said it will boost investment in the country.

“If we provide more opportunities to the private sector and investors, we will surely see significant changes in the Afghan economy in the coming years,” said Sakhi Ahmad Paiman, head of the association.

This interest rate cut has been one of a number of efforts by Afghanistan to boost both the banking sector and the economy and to improve access to finance.

In another key move, the Central Bank last year granted its first Islamic banking license – to the Islamic Bank of Afghanistan (IBA), previously known as Bakhtar Bank.

As Reuters reported at the time, financial inclusion is a challenge in developing economies and can be due to many factors, such as religion in Afghanistan.

World Bank data showed that only 15 percent of adults in Afghanistan have a bank account, while 16 percent cited religious reasons for not having one.

“We expect that introducing Islamic banking can help address this issue,” said Abdullah Ludeen, a central bank official at the time, adding that such exclusion was tied to other factors such as financial literacy.

“There are good opportunities for Islamic banking in the country, it’s an untapped market,” he told Reuters.

Interest Rate Cut In Place, Says Central Bank

The Central Bank reduced the average interest rate for this solar year in order to help boost the economy. 

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The Central Bank (Da Afghanistan Bank) said this week that the average interest rate cut phased in at the start of this solar year has finally been rolled out throughout the country. 

Central Bank officials said the interest rate cut, which was launched at the end of March last year, should now be adhered to by all banks across Afghanistan.

They said this move to cut the average interest rate had been made in order to help boost investment and improve economic growth.

Khalil Sediqi the Central Bank chairman said interest on loans dropped from 13 percent to 12.2 percent this solar year.

He said, in addition to reducing the average interest rate, loan guarantees have been simplified, and loan repayment periods have been adjusted from three years to either five or seven years.

“The average rate charged by the banks is 11.02 percent. This average was 13.17 percent in fiscal year 2016,” said Sediqi.

The Association of Industrialists meanwhile welcomed the lower interest rate and said it will boost investment in the country.

“If we provide more opportunities to the private sector and investors, we will surely see significant changes in the Afghan economy in the coming years,” said Sakhi Ahmad Paiman, head of the association.

This interest rate cut has been one of a number of efforts by Afghanistan to boost both the banking sector and the economy and to improve access to finance.

In another key move, the Central Bank last year granted its first Islamic banking license – to the Islamic Bank of Afghanistan (IBA), previously known as Bakhtar Bank.

As Reuters reported at the time, financial inclusion is a challenge in developing economies and can be due to many factors, such as religion in Afghanistan.

World Bank data showed that only 15 percent of adults in Afghanistan have a bank account, while 16 percent cited religious reasons for not having one.

“We expect that introducing Islamic banking can help address this issue,” said Abdullah Ludeen, a central bank official at the time, adding that such exclusion was tied to other factors such as financial literacy.

“There are good opportunities for Islamic banking in the country, it’s an untapped market,” he told Reuters.

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