A slowing global economy added to the difficulties. Annual growth in gross domestic product (GDP) in 2015 is expected to be a meagre 1.9 percent – up from just over 1.0 percent in 2014 – and is projected to rise slightly to 2.8 percent in 2016 before levelling off around 5.0 percent in 2018.

The heady days of double-digit economic growth, fuelled by foreign aid and military spending that followed the fall of the Taliban regime, appear to be gone for the foreseeable future. The exchange rate – a bellwether economic indicator – continued to lose value in 2015, falling by about 18 percent over the year and putting upward pressure on prices.

In 2015, economic hardship, increasing insecurity, and concern regarding the country’s future prompted a huge wave of migration, with about 146,000 Afghan migrants arriving in Europe, syphoning an estimated $1.5 billion from the economy. Government forces have been hard-pressed to contain the Taliban insurgency, fighting on without rest despite the severe constraints of being under-trained and under-equipped. As a result, the Taliban is now in control of more territory than at any time since 2001.

The banking sector continued to perform poorly overall as the ripple effects of the economic slow-down were felt. Bank lending to the private sector continued to decline over the year.

Credit to the private sector continued its precipitous decline that began in the second half of 2014, and dropped by 5.3 percent (year-on-year) over the first nine months of 2015. Total banking sector loans contracted sharply to $747 million in September 2015 compared to $818 million one year earlier, and are not projected to rise much faster as banks tighten credit standards in the face of a deteriorating economy. Asset quality also left much to be desired. The ratio of non-performing loans increased from 6.3 percent in June 2014 to 13.8 percent in June 2015, leading to a total loss of $14 million in the first seven months of 2015.

The response of the Afghan business community to the downturn will have implications for the health of the banking sector. During periods of economic decline, whether widespread as Afghanistan is experiencing or cyclical for a particular type of business, nascent enterprises are most likely to bear the brunt.

Yet the fact that conditions are changing opens up opportunities for resourceful firms to outsmart larger competitors who, during a downturn, carry on business as usual or are unable to adapt quickly – except to fire employees.

Such innovative firms can:

•  Gain market share from competitors unable to adjust to changing market conditions.

•  Maintain a strong cash flow throughout the downturn, in contrast to other companies that may have liquidity problems.

•  Become leaner, more cost-effective, and more efficient – better positioned to do well when the market improves.

The challenge for AIB is to identify such firms, design new financial products for them, and re-engineer internal operations to better monitor their performance.