Micro, small and medium enterprises (MSMEs) are the backbone of the Afghan economy. Many MSMEs in Afghanistan operate within localized clusters, which are concentrated networks of similar or complementary businesses which simultaneously cooperate and compete with each other. This fosters efficiency and innovation, while also sharing risk and providing security for MSMEs in Afghanistan’s challenging economic environment.

Clustered MSMEs also have higher levels of female labour force participation than is found in other sectors of the economy, providing a valuable pathway for women’s continued economic inclusion.

Clustered MSMEs face challenges including access to finance, technology, market opportunities and infrastructure. This joint research report by UNDP and UNCTAD is based on a survey with 1,350 clustered MSMEs in five urban centres of Afghanistan and discusses how clustered MSMEs can be supported to create more jobs, particularly for women, increase export competitiveness and drive Afghanistan’s economic recovery.