Small and medium-sized enterprises (SMEs) are vital economic drivers that create jobs, boost productivity, and encourage innovation. In fragile states, the success of SMEs is critical for development – helping foster socio- economic stability, reduce migration, and enable self-employment and work opportunities for youth, women and men. Yet the support needed for firms to grow and scale is largely absent, leaving many aspiring entrepreneurs without access to technical support and risk-tolerent, affordable capital.

In 2015, the Aga Khan Development Network (AKDN) began to assess the landscape of SMEs, with a focus on financing and technical assistance in four countries where it has operated for decades: Pakistan, Tajikistan, Afghanistan and the Kyrgyz Republic. The AKDN began initiating SME ecosystem assessments and consultations with women and men business managers and owners. The assessments found that, despite risk-mitigating schemes, existing financial institutions are still not providing the kind of financing required for SMEs to grow and thrive in these countries, with terms that are too short (maximum 3 years), collateral that is too high (100- 120%), and standard, inflexible repayment terms based on predictable cash flows and short grace periods. As a result, most start-ups still fail, while existing SMEs get stuck in a low-growth trap, limited by a lack of longer- term investment capital and customized technical assistance.