Post on 11-Nov-2021
Enterprises in the Internet Age
A case study on ICT usage in the development of small and medium
enterprises in Kabul
Master´s Dissertation
Author: Habib Said
Supervisor: Chris High
Examiner: Jonas Ewald
Term: HT20
Subject: Peace and Development Work
Level: Master´s degree
Course code: 4FU42E
Abstract
Humans live in an era where technology is spilling over exponentially across the globe and
considers a vital feature for fostering an inclusive digital economy. This study explores and
examines the potential of Information and Communication Technology services (ICTs)
usage in the development of entrepreneur small and medium scale enterprises (SMEs) in
Kabul, Afghanistan. This is a relevant area of study given the need to understand better the
role of ICTs in SMEs in developing countries and promote and achieve an inclusive digital
economy. The discussion and research on ICT usage in developing countries have
contributed to understanding entrepreneurship's nature in the digital era.
However, the discussion is rolling over the perception of ICT usage on an entrepreneur's
small and medium scale enterprises' productivity. Some scholars focus on the impact of ICTs
on the digitalization of businesses' economic development, while other scholars have
questioned their potential for economic development. In the case of Afghanistan, despite the
recent development in ICTs, there is a scarcity of information on the relationship between
ICT and SMEs entrepreneur’s productivity. Given the rapid adoption of ICTs in Afghanistan
during the last 20 years, and absence of information on ICTs in SMEs, it represents a very
interesting case that has yet to be studied.
This study's methodology followed a qualitative abductive case study and used semi-
structured interviews as primary data and existing literature as a secondary source. This study
developed the theoretical framework based on Activity Theory to analyze the collected data
and present findings. The findings show that ICT contributes to time efficiency, facilitate
cheaper communication, reduce the cost of business, facilitate access to information, and
increase competitions. The data analysis found that although ICTs have contributed
positively to entrepreneurs' productivity, they are strongly influenced by society's norms and
institutions, limiting their potential impact.
Key words: Afghanistan, Development, ICTs, SMEs, Activity theory
Table of contents
1 Introduction 1
1.1 ICTs and development 1
1.2 Justification of the study 2
1.3 Research gap 3
1.4 Objective and research questions 3
Research Questions: 4
1.5 Thesis Structure 4
2 Literature review 5
3 Analytical framework 9
4 Methodology 14
4.1 Qualitative method and case study 14
4.2 Data collection 14
4.3 Texts and Documents 14
4.4 Semi-structured interviews 14
4.5 Sampling and Sample Size 15
4.6 Ethical considerations 17
5 Background: Small and medium enterprises in Afghanistan 18
5.1 Economic context 18
5.2 Small and Medium Enterprises Definition 20
6 Findings 22
6.1 Entrepreneurs Characteristics 22
6.2 Characteristics of business 23
6.3 Regulatory Environment 24
6.4 Legal Regulations and Challenges 25
6.5 Type of ICT Practice 26
6.6 Application of ICT to Business Operations 28
6.7 The impact of ICT use on Business Performance 29
6.7.1 Retailers 30
6.7.2 Online Businesses 31
6.7.3 The Service Sector 32
6.7.4 The Construction Company 32
6.7.5 The Wholesaler 33
6.8 Challenges of ICT services 33
7 Analysis 35
7.1 Relationships between Subjects and Tools 35
7.2 Division of Labor and Tools 36
7.3 Community (Business Environment) 37
7.4 Rules and norms 38
7.5 Outcomes of ICT service 39
8 Conclusion 40
9 Bibliography 43
Appendices
Appendix 1. Interview guide
Abbreviations
B2B Business to Business
B2C Business to Customer
CPI Corruption Perception Index
ICTs Information and Communication Technology services
ITU International Telecommunication Union
GDP Gross Domestic Product
SDG Sustainable Development Goals
SMEs Small and Medium Scale enterprises
UN United Nations
UNCTAD United Nations Conference on International Trade Law
UNESCO United Nations Educational Scientific Cultural Organization
USAID United States Agency for International Development
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1 Introduction
1.1 ICTs and development
Throughout the past two decades, the presence and reliance on Information and
Communication Technology services (ICTs) have increased exponentially across the
globe. ICT services such as computers, the Internet, and mainly mobile phones are
considered an essential feature for business development and have a pivotal role in fostering
an inclusive digital economy, which everybody can benefit from (ITU, 2017; Gomez and
Ospina, 2001). ICT services have become almost indispensable in all areas of human life
and have played a vital role in the development of entrepreneur enterprises in developing
countries by linking businesses with their suppliers, customers, and internal manufacturing
processes and allowing them to communicate with each other in real-time (Ssewanyana, and
Busler, 2007).
To orchestrate daily operations and other business needs in developing countries, the
development of ICT services has changed the nature of trade, since the ICT not only connect
entrepreneurs to the world a lightning speed but also supports the increased quality of goods
as well as offers a wide range of opportunities in reducing the transaction costs, save money,
compare prices, access to information, coordination opportunities by exploiting new
markets (Deen-Swarray et al, 2013).
Afghanistan is one of the world’s poorest countries and has experienced decades of
protracted armed conflict. This has left the country fragile, with weak local institutions, poor
infrastructure, and economic stagnation (UNCTAD, 2019). Additionally, this has also
affected the population’s human capital, as there has been a loss and lack of skilled
professionals to maintain feasible and consequential infrastructure, education, and
maintenance for ICT (Sardari, 2020). Despite the obstacles and ongoing conflict, the
country has been witnessing a rapid growth in the ICT sector since the removal of Taliban
from power in 2001, with 62 Internet services providers, and increased mobile subscription
(World Bank, 2013). According to a United State Agency for International Development
(USAID) report published in May 2013, over 20 million mobile subscriptions registrations
were reported among a population of roughly 30 million people. The four mobile network
operators include; AWCC, Etisalat, MTN, and Roshan. The same report indicates, that in
the past decade the cost of mobile phones and airtime has decreased dramatically: the cost
of airtime decreased more than 500 percent from 0.36US$ (18Afg) per minute in 2003 to
0.06 US$ (3Afg) in 2012 (USAID, 2013).
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In 2018, the Business to Customer (B2C) E-commerce Index of the United Nations
Conference on International Trade Law (UNCTAD) ranked Afghanistan’s overall digital
readiness as 136 out of 151 economies. This index measures the “readiness of countries to
engage in online commerce, using four indicators: account ownership at a financial
institution or with a mobile-money-service provider, individuals using the Internet, the
Postal Reliability Index and secure Internet servers'' (UNCTAD, 2019:6). In 2017, the
International Telecommunication Union`s (ITU`s) ICT Development Index ranked
Afghanistan 159 out of 176 countries. This index measures countries in terms of e-
commerce and many of the sub indicators refer to affordability of ICT services, ICT skills,
and ICT infrastructure. The same report also indicates that mobile phone penetration in
Afghanistan scored 67.7 percent (UNCTAD, 2019). The total percentage of individual using
the Internet in Afghanistan, according to World Bank it was 5.9 per cent in 2013 (World
Bank, n.d), and rose to 17.6 percent in 2019, with the higher usage in big cities, e.g., Kabul
(Orfan, 2021). This is a robust improvement of the country in regard telecommunication
and the Internet connectivity, considering there were only 20,000 operational telephones in
2001 and no international connectivity until the Taliban’s removal (World Bank, 2013).
However, the potential of ICT services in entrepreneurial development is yet to be
recognized as it can play an important role in small- and medium enterprises (SMEs)
including trade logistics, and the electronic payment services.
1.2 Justification of the study
United Nations’ Sustainable Development Goals (SDG) 8 promotes inclusive and
sustainable economic growth and encourages entrepreneurship and job creation, which are
key factors to human beings’ prosperity. The target 8.2, which is “Achieve higher levels of
economic productivity through diversification, technological upgrading and innovation,
including through a focus on high-value added and labor-intensive sectors” and 8.3,
“Promote development-oriented policies that support productive activities, decent job
creation, entrepreneurship, creativity and innovation, and encourage the formalization and
growth of micro-, small- and medium-sized enterprises, including through access to
financial services” are especially relevant for this research (United Nations, 2015).
Considering the SDG goals and leave no one behind, it’s important to respect the role that
the small and medium enterprises play in economic development (ILO, n.d). Due to this,
many countries have shown an interest in the performance, size, and motivation of the small
and medium enterprises, mainly where this sector delivers economic opportunity and
livelihood for the poor (Ghiasy et al., 2015).
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1.3 Research gap
As SMEs account for 90 percent of Afghanistan's economic activities, the potential for ICT
usage within these businesses is substantial (Naithani, 2017). Yet, despite the advances in
ICT services within Afghanistan in recent years, much has not been researched. For example,
there is a scarcity of information on the impact of ICT services particularly mobile phone
usage, on the development of entrepreneurs’ enterprises and the challenges the entrepreneurs
face using ICT services. Given the challenges to developing and ICT infrastructure due to
the conflict and poverty in the country, Afghanistan is an extremely interesting edge case to
create a better understanding of the role of ICTs in development.
Many studies have promoted the benefits ICT can have on businesses in developing countries
(Ssewanyana and Busler; Deen-Swarray et al., 2013; Makena et al., 2015). Others have
questioned their potential impact on economic development (Gomez and Ospina, 2001;
Molony, 2006; Kleine and Unwin, 2009) According to Cataldo (2019), “the relationship
between ICT and productivity for companies in developing countries has not been well-
established, especially for micro, small and medium enterprises” (Cataldo, 2019: 292).
Despite the significant increase and improvement in telecommunication technology in
developing countries, there is little known how the ICT services are used, by who, and how
it has affected inhabitants and businesses (World Bank, n.d). This research contributes to the
ongoing debate and adds to the literature on ICT usage by examining small and medium-
scale enterprises in Kabul, Afghanistan. According to World Bank ICT services are crucial
development tools in contributing to global integration, and boosting businesses efficiency
(World Bank, n.d), the remarkable growth of ICTs usage and adaption in Afghanistan and
the importance of ICT services leaves researchers room to investigate ICT usage in
businesses in an incredibly complex setting where prolonged conflict and poverty have
shaped all aspects of the business environment.
1.4 Objective and research questions
Through the use of activity theory, this study intends to shed a light on the structures of the
Afghan entrepreneurs’ activities. The objective is to learn how ICT services have adapted
businesses activities in Kabul, Afghanistan. First, to understand the extent to which ICT
services play in facilitating or restraining entrepreneurs in realizing their motive or object.
Second, to explore the influence of technology on accomplishing the required or planned
outcome intended by entrepreneurs. Third, to develop an understanding of ICTs and mainly
mobile phones´ potentials in the business environment in terms of boosting entrepreneur’s
business productivity and impacts on the role of business intermediaries within Kabul
entrepreneurs` businesses. The research questions address these objectives.
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Research Questions:
1. What do entrepreneurs perceive to be constraints and challenges to
entrepreneurship in Kabul, Afghanistan?
2. How do SME entrepreneurs perceive the impact of ICT usage on their business
productivity?
3. What are the constraints of ICT usage in businesses in Kabul, Afghanistan?
The research will answer these questions using a qualitative abductive study with semi-
structured interviews in order to collect data relevant to the research questions. It uses the
Activity theory framework as a lens to understand the role of ICT service in Afghan
entrepreneurship. A qualitative case study approach enables a detailed study of the area to
develop an understanding of the usage of ICTs mainly mobile phones, and how it contributes
to the performance and development of entrepreneur businesses in Kabul (Creswell, 2013;
Thomas & Mohan, 2015). Regarding the selection of semi-structured interviews, this option
is motivated by the potential it has in widening the scope of information generated from an
interviewee. The data for the findings will be collected through interviews with Afghan
SMEs entrepreneurs in Kabul, Afghanistan in a varied set of occupations and interviewees
which were chosen based on convenience and snowball sampling.
1.5 Thesis Structure
Chapter 1 provides an introduction to ICT in Afghanistan and the research presented in this
paper. Chapter 2 describes previous literature related to ICT services in relation to business
in developing countries. Chapter 3 describes the theoretical framework used, and Chapter 4
defines the methodology used to conduct this research. Chapter 5 reports on SMEs in
Afghanistan. Chapter 6 describes the findings of the study, and Chapter 7 analyses these
findings using the theoretical framework. Chapter 8 provides the conclusions and areas for
further study.
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2 Literature review
Research on the use of ICT and entrepreneurs has generated considerable discussion among
scholars and reveals diverse findings on how ICT services contribute to entrepreneurs’
firms. Examining ICT usage and adaptation in small, medium, and large businesses
enterprises, Haynes et al. (1998) argue that larger companies have greater opportunities in
targeting the customer through the Internet compared to the small and mid-sized companies.
Small and mid-sized companies using the Internet may not produce greater opportunities;
however, the cost of doing business without access to the Internet is likely to be higher.
Internet usage has the potential to enforce the level of competition in the field, but it is
difficult for small business companies, who lack name recognition, and may have weaker
accessibility to the Internet and their Internet site than larger companies (Ibid).
Additionally, Ssewanyana and Busler (2007) argue that entrepreneurs in medium, large-
scale enterprises as well as the foreign businesses are likely to adopt ICT earlier than the
small and local owned business enterprises. The adoption of ICT and its higher rates of use
by medium and large firms, and foreign enterprises is due to their familiarity with
technology, their capability to hire a skillful workforce, capital investments, and advanced
business practices. In the case of small enterprises, there are various obstacles, such as high
costs of the required investment, hardware, software, the Internet, tariffs and taxes, and
limited knowledge skills, which are all stumbling blocks to their progress (Ibid).
There is a debate about the potential of ICT in SMEs in developing countries and their ability
to enhance economic development. Studies on ICT and entrepreneurs have done in
developing countries revealed that the uses of ICTs for business purposes contributed
positively to their firm’s operation by reducing prices and time of the trade, material, and
information flows. Furthermore, it can maintain customer relationships, shift transactions to
more regulated formal transactions, enhance capability and capacity of individuals.
Likewise, these opportunities facilitated by ICT services are fundamental to the enterprise’s
development and their entry to the global market (Poon 2017; Paunvo & Rollo 2015).
Elgin (2013) stresses the potential impact of ICT services on the informal entrepreneur’s
sector and argues that an increase in the enterprise`s productivity is likely to reduce the
informality of the enterprise. While reviewing the impact of the ICT on economic
development and states’ capacity building, Ndung'u (2019) points out that ICT opens
innovative space and enables economic inclusion through mobile payment platforms that
push the unbanked population into the banked system. It also has contributed to shifting
transactions to more regulated formal transactions (Ibid). Innovation facilitates economic
growth, capability, and capacity building for individuals to improve their livelihood
conditions. ICT also has the ability to transform the relation between the government and
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its citizens and enhance government capacity to improve governance and democracy
through e-services, and e-governance (Gomez and Ospina, 2001).
Makena et al (2015) study focused on the effect of the ICT such as the Internet, mobile
phones, computer, broadcast media technology on informal business performance in
MIolongo Township in Kenya. Their findings showed that mobile phones positively impact
the business performance by increasing sales, advertising, gathering information, reduced
operation cost, banking, decreasing transaction costs, and allowing informal micro-
entrepreneurs to communicate with their supplier and customer at much lower costs
(Ibid). Mobile phones use has been beneficial within the value system that can be supported
by E-commerce including ordering, delivery, customer enquiries, service support, and
boosted different types of transaction facilitation, such as selling and buying platforms and
money transfer which has positively contributed to carrying out transactions (Poon 2017;
Paunvo & Rollo 2015).
Deen-Swarray et al. (2013) argues that ICT promotes economic development and
encourages competitiveness in the global economy. In developing countries, mobile phones
are mainly used for conducting business, save money, compare prices, transact with their
customers and suppliers, and expand their customer network. They also indicated that
mobile phone penetration has contributed positively towards the efficient running of
markets and helped to reduce information failure that influences investment decisions
(Deen-Swarray et al, 2013). In addition, mobile phones are information-related technology
that reduce uncertainty and costs, increase income, manage risk and ties users to their main
purposes of mediated communication technologies, and serve as a substitution for a journey
(Duncombe and Heeks 2002).
On the other hand, Gomez and Ospina (2001) address the potential risks derived from the
implementing ICTs and point out that they are favorable only to those who are already in
desirable positions in terms of access, income, and education. Fuchs and Horak (2008) also
argue that “unequal patterns of material access, usage capabilities, benefits, and
participation concerning ICTs are also due to the asymmetric distribution of economic
(money, property), political (power, social relationships), and cultural capital (skills)”
(Fuchs and Horak, 2008: 101). In fact, mobile phones and ICT usage continue to perpetuate
pre-existing power imbalances, making it more difficult for people to exit poverty as power
imbalances in poverty are not addressed with the introduction of mobile phones (Carmody,
2012).
Access to ICT services continues to be a major challenge for the vulnerable group of the
population, and as previously mentioned, vulnerable groups are those who work in informal
businesses intending to generate daily income for their livelihood consumption (Gomez and
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Ospina, 2001). In such cases, it may be possible that increases in ICT usage have had a
negative impact on people’s ability to achieve poverty alleviation. For example, Kleine and
Unwin (2009) research on technological revolution among university students in Tanzania
reveals that student spending on mobile phone connectivity is five times greater than their
expenditures on food, resulting in a significant direct income depletion. Similarly, Diga’s
(2007) study on the spending behavior of households with mobile phones in rural agriculture
Uganda found that many households surveyed had reduced their monthly food expenditures
of store-bought food in exchange for more airtime.
Molony (2006) reveals that despite the increase of ICTs and their importance in developing
countries, where mobile phones are creating new forms of social networking, interpersonal
interaction through face-to-face contact is unlikely to change for some time. The trust
component is absent in ICT, and interpersonal interactions are favored over ICT services,
especially in building a business relationship. Molony (2006) stresses the ICT services
potential, especially mobile phones, to help entrepreneurs with supply and demand for pre-
existing, trust-based relationships. He also argues that lack of trust among Micro, Small,
and Medium Scale enterprises (MSMEs) is attributed to the uncertainties created by an
economic environment that fails to function within proper legal and judicial apparatuses.
Scholars such as Duncombe and Heeks (1999), Elgin (2012), Deen-Swarray et al. (2013),
Jagun et al., (2007), and Ssewanyana and Busler (2007) found that ICT particularly mobile
phones has improved the business performance of the entrepreneurs’ enterprises and
reduced-price variation, increased their profits, expand their network, reduced waste and
increased consumer welfare. Njau and Njuga (2015) stated that the more entrepreneurs use
ICTs in their enterprises, the more success in their business performance.
Other scholars such as Gomez and Ospina (200), Molony (2006), and Kleine and Unwin
(2009) questioned the potential impact of ICT and argued that would not contribute to
productivity of those already in a disadvantaged condition. Likewise, the consensus on the
impact of ICT on growth and productivity and developing countries has not been reached
(Hawash and Lang, 2020). In many developing economies, low productivity is one of the
key obstacles for economic growth, especially in post-conflict countries such as Afghanistan,
which suffers from economic stagnation (Mohmand, 2012, & Cirera et al., 2016). Low
productivity is not limited to only economics, but it extends to impact other developmental
aspect such as security, poverty, and human capital, which are important drivers of
democratic institutions. Economic growth reinforces human capability and capacity,
improving health and providing economic opportunities, thereby positively affecting peace
and stability. To combat low productivity growth one potential enabler is the adaption and
use of ICT services that can facilitate growth by enhancing businesses productivity and
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making use of production factors more effective and sufficient, and facilitating the adaption
of other technology services (Cirera et al., 2016). According to Cataldo (2020), “the
relationship between ICT and productivity for companies for companies in developing
countries has not been well-established, especially for micro, small and medium enterprises”
(Cataldo, 2020: 292).
In 2003, the United Nations World Summit on the Information Society emphasized
preventing the digital divide between developed and developing countries and building an
equal sharing of ICTs to improve people´s living standards (UN, 2003). According to
UNCTAD, (2019) Afghanistan with no international connectivity before 2002, while in 2014
access to mobile phones per household reached 87 percent and 94 per cent in urban areas
(ITU, 2017). Hence, this study adds to the debate mentioned above and literature by
examining the ICTs usage and adaption among SMEs entrepreneurs. Considering the high
usage of ICT services which could have the potential to expand SMEs entrepreneur’s
economic activities; it is necessary to research, the perception of how the entrepreneurs in
small and medium scale enterprises in Kabul use ICT services particularly mobile phones,
and how the usage of such a service mediates to the business performance and productivity.
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3 Analytical framework
The analytical framework for the core of this study was developed from the Activity theory
(AT) approach. According to Komunte et al., (2012) activity theory assists in analyzing the
features that influence the performance of an activity “by a subject, using artifacts, subject
to certain rules, and divided among members of the community to act in specific roles, to
accomplish object and ultimately an outcome that influences the organization” (Komunte et
al., 2012:76). It should be understood as a theory-based conceptual framework, which serves
for greater understanding of actor activities which incorporates activities within social,
economic, and organizational contexts and attempting to tie actors’ actions within the
relevant contextual elements (Engeström, 1987). Activity theory was developed by the
Russian Psychologists Lev Vygotsky in the 1920s and early 1930s, and it further developed
by Alexei Leont`ev, who provided a more constructive lens through which to understand
sociocultural impact (Parks, 2000). Engeström (1999) argues that “activity theory has the
conceptual potential and methodological potential to be a pathbreaker in studies that help
humans gain control over their own artifact and thus over their future” (Engeström,
1999:29). It examines change and the development of human activity into practice
(Karanasios, 2014).
Komunte et al., (2012) applied the theory to study on the usage of mobile phones among
women entrepreneurs in Kenya and Uganda, whereas Foster (2010) studied the case of
mobile regulation in India. This framework has been used in different areas including
enterprises engineering, learning (Schellong, 2009 & Kouzmin et al., 1999) and it has also
been used for examining ICT for development (Karanasios (2014). The activity theory
framework is relevant to this study due to the fact that its principles can be useful in
analyzing problems of human interaction with ICT and mobile phones (Komunte et al.,
2012). It allows the researcher to examine multiple aspects and outcomes which can affect
an entrepreneur’s decision to use ICT and provides for a broader window of sociocultural
impact and challenges of the use of ICT (Parks, 2000).
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Figure 1. Activity theory Framework by Engeström (1987:78).
The framework is composed of seven different activity concepts which form an activity
system. The most important is the outcome or activity, which the subject aspires to achieve.
The subjects are the ones performing the activity in question, and can include actors or
groups, and it is their viewpoint from which the framework is analyzed (Karanasios, 2014).
The tools are used by the subjects to achieve an object. There are debates among what is
considered the appropriate object, and questions about object versus motivation, with some
scholars classifying the object as “the thing being done” and others as “the problem,
situation or focus of any activity” (Hasan and Kazlauskas, 2014:9 and Karanasios, 2014.
Table 1). In the research, the object is to be understood as the objective of using ICT,
answering this question “why is this activity taking place?” (Karanasios, 2014. Table 1).
For the remainder of this research, the object will be referred to as the objective, to avoid
any confusion between the classification of objects, tools and outcomes.
The tools are used by the subject or community to accomplish the objective and are the main
focus point of Activity Theory. They can be technologies of physical tools, mental tools or
ideas, or people, communities or environments and are acted upon an objective to produce
the outcome (Hasan and Kazlauskas,2014: Karanasios, 2014). According to Kuutti (1996),
instruments or tools should be viewed as an extension rise of human activity that shape
behavior, rather than as a given or granted object. Tools or instruments are expected to
present new ways of working and to change the division of labor and further establishing
new efficiencies and new form of labor or expose redundancies of some labor (Parks, 2000).
These three components represent the fundamentals of an activity, while the additional
components of rules and norms, community, and division of labor were added by Engeström
(1978). The additional support that an activity includes a wider community, which is
governed by norms and executed through a division of labor; all of which occur between
the subject and their contextual environment (Karanasios, 2014).
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According to Karanasios (2014), tools or instrument usage is governed by rules and norms,
which refer to the implicit and explicit conventions that constrain or govern the activity.
They establish the legal and cultural context that tools are used in and can alter activity rules
and norms that are restructured and influenced by technology and vice versa. Instrument or
tools does not simply refer to the items that are, rather they are the outcome of a social
practices and foregoing activities, embody cultural characteristics (e.g., mobility, status,
freedom). Further, it has the potential to act as a norm and as a means of labor in succeeding
activities (Kuutti, (1996).
According to Engeström (2001) community includes participants of an activity who share
the same objective, such as entrepreneurs with the same business or competitors, potential
customers, and intermediaries, and the activity does not take place in isolation from these
actors, and they have the potential to influence the activity. The community refers to the
environment and other actors within which the activity is conducted (Karanasios, 2014).
Division of labor refers to who is responsible for which tasks and how the roles are
organized (Karanasios, 2014). It can also refer to “power and positions in relation to the
object[ive] (Parks, 2000;). Tools or instruments are expected to present new ways of
working and to change the division of labor and further establishing new efficiencies and
new form of labor or it could redundant some labor (Ibid). For example, Jensen`s (2007)
study on information technology in the south Indian fisheries sector found that mobile
phones improved fishermen’s profits in price reduction which also increases consumer
welfare. Mobile phones allowed fishermen and consumers to negotiate price and
transactions, on the other hand transforming the rules/norms when it comes to activity and
disrupting the community and make some labor redundant, for instance intermediaries role
in fisheries sector were decreased.
Use of Framework in Research:
By combining the technical and the social, Activity Theory emphasizes on technology for
its capability to alter an activity and has been used for greater understanding in assessing
social economic manner in a particular environment (Kuutti, (1996). This study adapts
activity theory to conceptualize how entrepreneurs in Kabul Afghanistan interact with the
ICT to their business performance in a networked environment. The activity system for this
research is as follows:
1. The subject in this research are entrepreneurs of small and medium enterprises in
Kabul, Afghanistan.
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2. The objective is the purpose of using ICT, answering the question, “why is this
activity taking place?” (Karanasios, 2014. Table 1). It represents the business
operations that ICT services are used for.
3. The tools are ICT services and mobile phones and the Internet which the subjects
use. They contribute to the transformation of the objective into the desired outcomes.
4. The community represents the business environment who share the same objective
which includes competitors, potential customers, and intermediaries. As it was not
possible to interview the competitors or customers of the businesses, this
information was received through the entrepreneurs themselves.
5. The rules and norms include government regulations and customs which regulate
action and interaction within the business environment.
6. The division of labor are tasks which are necessary for a business to fulfil. They are
realized through subject’s operation within the enterprise and community.
Additionally, important in Activity Theory, is the relationship and possible tensions
between the different components (Hasan and Kazlauskas, 2014). There are four possible
sources of tension or contradiction in an activity system: “primary contradictions are found
within a component of the activity (i.e., in the rules/norms, object, etc.); (2) secondary
contradictions occur between constituents of the activity (i.e., between the community and
the tool); (3) tertiary contradictions occur between the current activity and its previous form
(i.e., before change); and (4) quaternary contradictions occur between the activity and
related activities” (Karanasios, 2014: 7). The tensions can cause subjects to switch away
from established norms or indicate areas for potential change in the activity system (Ibid).
Activity theory emphasizes different developmental, psychological, educational, and
cultural approaches (Engeström, 2001). From analytical perspective, particularly when it
comes to the study of Micro and Small-scale business entrepreneurs and their engagement
with ICT and mobile phones, the activity principles play an important role. In the case of
ICTs usage and adaption, Activity theory helps researchers to understand the ICT as a
mediating component of human activities with the world (Kaptelinin, 1996). The research
questions for this study were formed incorporating the principles of activity theory in mind,
especially as “it (Activity theory) recognizes that activities have multiple motivations and
underscores the complexity of the range of social, cultural, political, and other factors which
influence activities” (Karamasios, 2014: 11). Activity theory provides a coherent way to
analyze the activity of organizations that interact with ICT services (Foster, 2010).
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Furthermore, as it mentioned above that ICTs and mobile phones are mediating tools for
interaction of entrepreneurs within the business environment. In this study, activity theory
has the potential to facilitate a better understanding of how technology enhancement and
penetration impact change and how the use of mobile phones in the business environment
leads to the developmental transformation.
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4 Methodology
The methodology of this research established the use of case study on ICT usages and their
impact on the development entrepreneur enterprises in Kabul, Afghanistan. It also described
the position of the selected case study as well as the chosen abductive approach. The chosen
method was to define and justify semi-structured interviews, snowball sampling, and data
validation. Furthermore, this section also defined and examined the study's limitation and
delimitation, including data availability, costs and security limitations, participants'
willingness, and research method. This study also has weighted the ethical considerations.
4.1 Qualitative method and case study
This research methodology is a qualitative abductive study with semi-structured interviews
and secondary materials to collect relevant research questions. This study follows abductive
logic of inquiry, using the analytical framework as a lens to understand the role of ICT
service in Afghan entrepreneurship. A qualitative case study approach enables a detailed
study of the area to develop an understanding of ICT usage, particularly mobile phones, and
how it contributes to entrepreneurial businesses' performance and development in Kabul
(Creswell, 2013; Thomas & Mohan, 2015). The main driving force for using a case study
design was the opportunities to produce a vast amount of information. It enables the
researcher to use various types of evidence to understand the importance of a case from
within, in order to present the findings and answer the research questions (Mills et al., 2012).
Due to the environment where this research was based, the case study requires multiple
sources of information were needed to picture Afghan entrepreneurs' ICT usage. The case
study design also allows for triangulation of data sources to understand the case of ICT
usage in the development of Afghan enterprises.
4.2 Data collection
4.3 Texts and Documents
Texts and documents were used for this research to offer a broad range of secondary sources.
Academic literature, development reports, and official documents were required to describe
the environmental context and offer another inspection viewpoint. This was also supported
by the use of a case study, which required multiple data inputs.
4.4 Semi-structured interviews
This study relied primarily on semi-structured interviews, motivated by the potential they
have in widening the scope of information that generated from an interviewee. Semi-
structured allowed the interviewer to ask open questions rather than following a strict
formalized question that impedes the interviewer from discussing with the informant. The
structure and flow of interviews piloted through the interview guide, and it was further
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modified based on the context of each entrepreneur's interviewed for this study. This
interview guide can be found in appendix 1. The interviews were conducted in the local
language (Dari) and were done face-to-face with the entrepreneurs, since face-to-face
interviews make the collected data more valuable because it allows for observation of
interviewees' facial expressions and body language. All interviews were collected in
November and December 2020 in Kabul, Afghanistan.
4.5 Sampling and Sample Size
Seventeen interviews were conducted with individual entrepreneurs engaged in Small and
Medium-scale Enterprises in Kabul, Afghanistan. This was a suitable number of interviews
based on "an appropriate sample size for a qualitative study is one that adequately answers
the research question" (Marshall, 1996: 523). Furthermore, it was as many as possible
concerning the time spent in the field and the need to analyze the data within the timeframe.
It additionally allowed the researcher to have closer involvement with the participants,
which was vital in interview-based studies (Bryman, 2012).
Sampling was based on a mix of convenience and stratified sampling. A majority of these
interviewees were found through personal networks. Trust and social connections were a
large determinant in the participants' willingness to take part in the research due to the time
needed to complete the interviews and generally low trust levels in sharing information with
strangers. Stratified sampling was also used as there were several subsectors between the
participants by design, including retailers, wholesalers, the service sector, and e-commerce
(online retail) (Bryman, 2012). This was to provide a wide range of types of enterprises to
analyze. The interviewees were engaged in a varied set of occupations and interviewees.
Some interviews were procured through other participants' recommendations, and therefore
snowball sampling was also used (Marshall, 1996).
Three interviews were conducted with entrepreneurs in clothing retail; these are designated
using R. Two businesses sold cosmetics and accessories and are also symbolized with R.
Two were conducted with mobile phones sellers and are also denoted using R. One
interview was conducted with furniture manufacturer and is also designated with R. Three
participants were wholesalers, in various sectors, including pharmaceuticals, and hygienic
supplies, these are symbolized with WH. Three participants owned various service
operations, including a print and computer repair business, a photography shop, and a
mobile repair and programming service. They are designated in the Findings with S. A
construction owner was also interviewed and can be also found as S. There was also a food
producer, who specialized in saffron and is represented with F. This study also interviewed
an entrepreneur with an online business, who is represented with E. The inclusion of this
participant is to provide a different angle to ICT usage.
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This study used the activity theory framework to understand the structure of the Afghan
entrepreneurs' activities to how ICT services facilitate or restrain realizing the entrepreneur's
motive or object and the influence of technology on accomplishing the required or planned
outcome. The Location of Kabul was selected as its capital and largest urban center and the
political and economic hub in Afghanistan, where most economic activities take place and
host the majority of the Information technology (UNCTAD, 2019 & World Bank, 2014).
According to the World Bank Group report on Doing Business in Afghanistan, starting up
a business and getting electricity connection is easier in Kabul than in other larger cities
(World Bank, 2017).
Limitations and delimitations
The interviews were conducted in Dari, which could be a limitation due to the effect of the
translation process. Due to the time limitation, this research does not include all business
sectors in Kabul. Another limitation this study faced was that many entrepreneurs
approached interviews and did not want to participate due to time limitations or knowledge
about the topic itself. Another challenge was that although participants were informed about
the study's purpose, some of them did not want to share complete information in response
to some interview questions. This could be due to the taxation system that exists in
Afghanistan. Taxation in Afghanistan is based on the business's physical size if there is no
exact data on the entrepreneur's sales. This is also further discussed in the Findings.
The most significant limitation was personal safety, as, during the research period, there
was increased violence and attacks in Kabul. This affected the ability to conduct interviews
with other businesses in different areas of the city. It also narrowed the time windows to
have interviews as some enterprises closed earlier due to increased risks of armed robbery
and prioritizing returning to their homes before it got dark. The ability to conduct this
research was heavily rooted by living there and having contacts with other community
members who know the interview participants.
This research was delimited to studying the impact of the ICT on the small and medium-
scale businesses in Kabul city and how it could determine their business performance
options. The focus of the study will be small and medium scale businesses in Kabul,
Afghanistan. In an environment like Kabul, where insecurity is at its stake, this study did
not cover other business markets and entrepreneurs. Also, to generalize the data collection,
it important to note that a nation consists of individuals with different interests and studying
the entire nations populations is impossible due to the limited time, resources, and security
issues. This study focused on the phenomenon of ICT and SMEs entrepreneurs in Kabul as
representative sample to understand the entrepreneurs’ perception of entrepreneurship
challenges and ICT usage for the businesses that can be generalized to the entire SMEs in
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Afghanistan. However, since Kabul is the capital and an economic urban center, the data
might have been different if this study included the rural area of the country.
4.6 Ethical considerations
Ethical guidelines from UNESCO's Code of Conduct were followed when conducting
interviews (de Guchteneire, n.d). This framework was chosen based on its attention to
different cultures and emphasis on local customs. Interviewees were kept anonymous to
protect the integrity of each individual participants were informed about the purpose of the
study and what the data was intended to be used for before the interview began. They were
also told they could terminate the interviews at any time or not answer all questions if they
wished. During the data collection, some of the participants or interviewees were very
selective in their replies. Others were entirely contented with the value of their replies and
wanted to make it public. It was repeatedly insisted before the interviews that this study will
not disclose their names and affiliations. No questions related to the name of the company
or their own were asked in order to protect their anonymity.
Being from Afghanistan myself, understanding the social and cultural context helped to
create rapport, which allowed them to discuss more openly. It was helpful in not relying on
a translator, which avoid misunderstanding and uncertainty. As well as addressing the many
cultural norms that a non-Afghan might not have been aware of could affect the result. As
it also helped shape the question in a detailed manner to avoid superior attitudes towards
those in need of development. However, being from Afghanistan could also affect bias in
the research, to help reduce this risk, all the questions were written and asked using neutral
words and tone.
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5 Background: Small and medium enterprises in Afghanistan
5.1 Economic context
Afghanistan, a landlocked country in the southwest of Asia, has been used as a buffer state
by superpowers and their rivalries due to its geopolitical location, which connects three
major cultural and geographic regions to central and south Asia, as well as to Gulf states
(Tellis and Mukharji, 2010). As Saikal (2004) puts it, “any state that has any interests in
Central Asia (or for that matter, South and West Asia) is interested in what happens in
Afghanistan” (Saikal et al.,2004:8). The value of the regional approach made the country as
a battleground, twice invaded by Great Britain during the 19th century, as a power struggle
between the British Indian and Russian Empire, and at the beginning of 1980s between the
Soviet Union and the United States. After the withdrawal of the Soviet Union in 1989, the
aftermath of the war shaped the aspect of the conflict and escalated the ethnic conflict due
to lack of a clear consensus on power-sharing (Burnell et al., 2017; and Saikal et al., 2004).
This also led to the emergence of the Taliban and the conflict continued until following
United States intervention in late 2001 (Ibid).
Decades of protracted armed conflict has destroyed Afghanistan`s infrastructure and
industries; and poor governance, violence, and state institutions fragility have created an
unpredictable economic climate, where state regulation within the market is absent. This
has resulted in economic exploitation by the oligopoly and local power holders (Mashal
2014 & Ghiasy et al., 2015).
Despite the protracted conflict, Afghanistan still managed to be one of the top improvers in
the Doing Business Report, which focused on enhancing the legal framework for businesses
by the World Bank Group. The report assesses the ease of having a business through the
“process for business incorporation, getting a building permit, obtaining an electricity
connection, transforming the property, getting access to credit, protecting minority
investors, paying taxes, engaging in international trade, enforcing contracts and resolving
insolvency” (World Bank Group 2019, p.1). Afghanistan ranked 167 out of 190 countries
in 2019 and 173 in 2020, and while it was the biggest improver since 2018, the regulatory
environment is still a significant barrier to entrepreneurs. In 2020, the Doing Business
Report ranked Afghanistan 173 in getting electricity, 178 in paying taxes and 177 trading
across borders (World Bank Group, 2019 and World Bank Group, 2020). While the ranking
still has considerable progress to be made, the improvement over recent years demonstrates
a rapidly changing business environment.
Entrepreneurs in SMEs play an essential role in developing countries economic growth by
employment creation for the poor people (Esselaar et al., 2007). However, in Afghanistan,
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there are important factors that affect entrepreneur’s business investment decisions. As
Mohmand (2012) argues, despite billions of dollars provided in aid assistance by foreign
countries, there are still persistent issues affecting the country´s long term economic growth;
the economy is donor-driven where strong democratic institutions and security are absent,
and its administration is plagued by corruption hampering economic growth and
development processes. These create an unequal economic environment of exploitation for
small economic and political elites (Mohmand, 2012). The uncertainty and instability of the
business climate can be attributed to the dependence on economic assistance, insecurity,
lack of an industrial and clear link between the market needs, and challenges related to
border transit, transportation, and bribery at customs and taxation offices (Mashal, 2014).
In the context of weak governance, and insecurity, the state’s effectiveness in maintaining
the rule of law, widespread systemic corruption worsens the relation between the
government and its inhabitant, resulting the uncertainty of its citizen towards business
development (Mohmand, 2012). In 2019, the country performed enormously poorly on
Transparency International’s Perception Index and ranked Afghanistan 173 out of 180
countries with high corruption (CPI, 2019). This also could play a critical role in doing
business in the country as it discourages entrepreneurs’ from making investment decisions.
Decades of war have interrupted the population`s access to social services, including health
and education, enabling them to pursue personal and economic life (Mohmand, 2012). As
more than half of the population continues to experience poverty and a significant portion
of the population are vulnerable and at serious risk of falling into poverty. According to the
United Nations Educational, Scientific and Cultural Organization (UNESCO) report
published in 2013, the adult population´s literacy rate was at 26 percent which scored the
country the fourth lowest in the world. There are still challenges hampering access to and
full enjoyment of the right to education, such as lack of security around school and lack of
teachers in most rural areas. Education is an essential factor for economic opportunities,
social development, it reinforces human capability and capacity, thereby for peace and
stability (UNESCO, 2013). A great majority of the population still lack access to safe
drinking water and sanitation convenience (UNESCO, 2013). According to the Asian
Development Bank (2019), between 2016 and 2017 survey conduct on Afghan living
conditions revealed that only 36 percent of the population had access to safe drinking water.
Considering the development of infrastructure that enables a state to bring long-term
economic growth, the country experiences from poor access to energy supply, poor
connectivity, and safe drinking water are persistent issues affecting business development
(Asian Development Bank, 2019). According to World Bank (2018), the Afghan
government remains greatly dependent on imported power. Despite many infrastructure
investments, the infrastructure remains poor due to heightened insecurity, and more than 70
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percent of the population lack access to grids. Even for those who have access, it remains
unreliable, and blackouts are common.
Despite the socio-political and economic factors, there are also challenges rooted in the lack
of funds and credit access for entrepreneurs to start a business. Financial systems are
underdeveloped; data stipulated by Work Bank shows that a third of formal and two-thirds
of informal businesses do not have a bank account (World Bank Group, n.d). One of the
major challenges that affect an entrepreneur’s decision to take loans is the lack of an
established financial structure and the collateral requirement, banks require collateral to be
120 percent more than the applied for loan (USAID, 2018). Therefore, in most cases
entrepreneurs use internal funds to finance their supply base, only 3 % of entrepreneurs use
credit/bank loan for investment (Ibid).
5.2 Small and Medium Enterprises Definition
Despite a number of efforts aiming to simplify the definition of small and medium scale
enterprises, no universal definition of SMEs exists to explain what constitute an SME
(OECD, 2004). According to Ardic et al. (2011), “the heterogeneity of SMEs themselves
and the nature of the economy they operate in might mean that establishing a global
definition is not feasible” (Ardic et al, 2011, p. 7-8). SMEs are mostly defined based on the
number of employees and loan size (Ibid). The Afghan state defines SMEs as enterprises
that made up of 5 to 99 employees with a total/annual asset in physical capital less than
AFN 10 million for manufacturing and less than AFN 5 million for service sector (Mashal,
2014). According to International Finance Corporation (IFC), micro-scale businesses have
up to 10 employees and small enterprises comprise up to 49 employees with total assets up
to $3 million and medium firms made up of up 300 employees and total assets of up to
$15million (IFC, nd). In Afghanistan, the definition of SMEs serves as a guideline rather
than a standard, since the Afghan commercial bank and microfinance institutions tends to
define the urban formal SMEs by “the loan size they can manage with relatively
sophisticated management systems such as business records” (Naithani, 2007:4). For this
research, micro- businesses include enterprise that has less than five employees, small scale
enterprise is classified as those businesses with five to ten employees, and the medium scale
enterprise with more than ten employees. This adapted definition is to provide a more
accurate version of the real-life context. Furthermore, this definition is reflective of what
the entrepreneurs in the interviews identified as their business size.
In Afghanistan, many entrepreneurs operating in small and medium scale enterprises with
varying levels of formalization (Naithani, 2007). Most entrepreneurs operating their
enterprises within the urban centers and are made up of 90 percent retailers include roughly
every visible retail store composed of small services, retailers, workshops, and light
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manufacturing (Ibid). Entrepreneurs engaged in SMEs constitute 80 percent of businesses,
employ one third of the labor force and contribute to almost half of the country`s Gross
Domestic Products (GDP). The SMEs´ significant contribution to the country´s GDP and
its contribution to employment make them important valuable business’s entities (Ghiasy et
al., 2015). The Afghan economy is based on a complex mix of the informal and informal
sectors, and between 70 to 80 percent of them operate informally (Ibid).
The informal nature and size of entrepreneurs’ businesses in Afghanistan are because of two
decades of economic instability and political turmoil. Although, the informal business in the
country has provided some limited economic mobility, while showing remarkable resilience
throughout the several phases of conflict (Ghiasy et al., 2015). The protracted armed
violence and its impact on physical infrastructure and financial security have acted as a vital
external factor for entrepreneur’s business growth (Naithani, 2007, Ghiasy et al., 2015).
Furthermore, as mentioned above, poor governance and fragility of states institution are
likely to be a constraint for a free and competitive market environment, where a free market
with state regulation is blocked across the country by the oligopoly and local power holders
(Mashal, 2014). In 2011, a survey conducted with Small-scale enterprise entrepreneurs in
Afghanistan shown that registration brings few benefits “in term of government service
delivery, contract and law enforcement, government protection (including for labor), or
access to affordable finance” (Ghiasy et al., 2015:11).
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6 Findings
6.1 Entrepreneurs Characteristics
Entrepreneurs owned enterprises in Kabul, Afghanistan which offered a variety of consumer
products and services, such as, cosmetic and accessories, clothing store, mobile phone store,
food product producer, construction, wholesalers, and services. Most of the enterprises in
Kabul, Afghanistan interviewed were individual or family-owned businesses (R-1, R-2, R-
3, R-4, R-6, R-7, R-8, S-1, S-2, F-1, WH-2, WH-3). The age range of interviewees was 21
to 55 years old, and all were male (see table 1).
The majority of the entrepreneurs in Afghanistan are male dominant (Ghiasy, et al., 2015).
When considering the entrepreneurs’ level of education, most of these entrepreneurs had
completed a bachelor’s degree or currently enrolled in a bachelor's program. Six out of
seventeen entrepreneurs had completed their bachelor’s degree (WH-1, WH-2, S-1, S-4, F-
1, E-1) and six were currently enrolled in higher education (R-2, R-4, R-6, R-7, R-8, WH-
3). Only three of the interviews had studied Business degrees or subjects relevant to their
business in university (E-1, WH-1, S-1). Among those currently studying, it was common
for them to view their businesses as a way to earn income and they planned to change careers
if they are able to get a job in their relevant field of study (R-8, S-1, P-2, R-6). Two of them
had not completed the standard 12 years of education in primary and secondary schools, due
to the economic and security reasons (R-5, P-3). Both had only completed primary school,
while one of the informants did not have any formal education (S-3). The interviewee who
had not received any formal education, worked in repairs and was self-taught.
Table 1. Subject characteristics
Variable Category
Age 20-29 11
30-40 4
41-55 2
Educational level Less than Primary level
1
Completed Primary
2
Completed Secondary
2
Enrolled in Higher education 6
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Table 2.
Variable Category
Completed
Diploma/degree and above
Undergraduate
5
Graduate 1
6.2 Characteristics of business
Entrepreneurs owned clothing stores, mobile phone stores, a home furnishing shop, a food
producer, a construction company, service and repair shops, cosmetics and accessories
shops, and wholesale businesses. Following the previously given definition of micro-
entrepreneurs as having less than five employees, small businesses as having five to ten, and
medium as being ten to 99 employees, a majority of them were operating within micro (R-
2, R-3, R-5, R-6, R-7, S-3) and Small-scale enterprises (R-1, R-4, R-8, S-1, S-2) while the
wholesalers and construction company operated as a medium scale enterprise (F-1, E-1,
Wh-1, Wh-2, Wh-3, S-4).
It is common for retailers and wholesalers to import cosmetics, clothing and textiles from
China and Turkey since they have a dominance in the regional textile market share (Parto
et al., 2012). The entrepreneurs either imported their products from outside the country
including China (R-2, R-5, R-6, R-6), Turkey (R-1, R-2, R-3, R-8), and Dubai (R-4, R-5).
Additionally, Afghanistan does not have a significant textiles industry due to prolonged
conflict which is unfavorable for large scale industry development (Parto et al., 2012).
Afghans do produce their own textile, but it is more common for this to be at the micro-
level and is not in sufficient quantity for many businesses (R-1, R-2, R-3). The whole sellers
operate as a B2B, while the other entrepreneurs are business to consumer (B2C). The
wholesaler as an intermediary’s enterprise, imports goods from outside the country and
further trades with entrepreneurs operating within a micro- and small-scale enterprise.
Between the interviewees, WH-1 is a supplier for R-7.
Additionally, the Online retailer, which is a relatively new business in Afghanistan, operates
as an intermediary between local retailers and customers, who purchase their products
online. There are around 50 online businesses operating within the major cities. These online
businesses are active in the capital in context of websites and social media platforms and
selling a variety of goods online such as computers, clothes, cosmetic, kitchenware, and
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furniture to cars (UNCTAD, 2019). The online retail includes home appliances, food,
wiring, clothing, sports equipment, and other products. The online retail enterprise has an
official website and advertises and sells directly through social media (E-1).
Table 3. Characteristics of Entrepreneurs enterprises
Entrepreneur’s businesses
Clothing store R-1, R-2, R-3 3
Mobile phones retailer R-4, R-5 2
Cosmetic and accessories retailer R-6, R-7 2
Services S-1, S-2, S-3 3
Food products F-1 1
Construction S-4 1
Home furnishing R-8 1
Wholesaler WH-1, WH-2, WH-3 3
E-commerce E-1 1
Table 4. Scale of enterprises
Type of Business
Micro 6 R-2, R-3, R-5, R-6,
R-7, S-3
Small scale 5 R-1, R-4, R-8, S-1, S-2
Medium scale enterprise 6 E-1, F-1, S-4, WH-1, WH-2,
WH-3
6.3 Regulatory Environment
According to the Ministry of Finance, all individual persons, enterprises, and organizations
hold Taxpayer Identification Number and are required to pay taxes and custom duties which
include taxes from the employees’ salaries or from rental payments. In order to pay taxes,
the enterprises are required to maintain and preserve their business records related to all
transactions, movable and immovable property to prove payment of an accurate amount of
tax. The business records normally include the source of documents which support records
of sales, cash register slips, credit card receipts, purchase orders, work orders, contracts,
bank deposit slips, guarantees, import, and export documents (Ministry of Finance, 2012).
Legal entity tenants or natural person tenants renting a property for business purpose and
paying more than AFN 10,000 per month are liable for tax payment of 10 % of the rent.
There are fixed taxes on certain businesses and transaction types, the two of fixed tax on
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type of business include; tax on import of goods, and fixed tax on small businesses. A small
enterprise entrepreneur who does not keep the detailed records of the business and the gross
annual income of the person is less than AFN 3 million for the tax year, are subject to fixed
taxes based on the physical size of the business (Ibid).
6.4 Legal Regulations and Challenges
All entrepreneurs interviewed had a Tax Payment Identification Number and their
enterprises were registered to the Ministry of Industry and Commerce, and Kabul
Municipality. Two enterprises also sell medical and hygienic products and have a license
from both the Ministry of Commerce and Ministry of Public Health (WH-1, WH-2). The
online retail enterprise also has a registration license from Wakhan, a department of the
Ministry of Communication and Information Technology. Wakhan is a department
dedicated to services and regulations of those trading via the Internet. According to (E-1) to
expand to an international online business, he had to register his business at Ministry of
Industry and Commerce as a logistic company, where he pays four types of taxes; “tax on
our office rent, second is based on the employees’ salaries, and a quarterly tax on general
provisions, and annually 4 percent of taxes from the profit of the enterprise” (E-1). The
registration of business according to one entrepreneur (R-3) has become much easier due to
ICT services, making it easier to ask for and find information about the process and
receiving the necessary documents before going to the office.
Despite the process being improved with ICT service, The Registration of Business and
Taxation Office in Afghanistan remains a constraint to the development of enterprises due
to the high levels of corruption. An entrepreneur exclaimed “it’s like a trap made by the
government because once you register your business, all the problems begin to start. […]. I
do not have any issue to pay my taxes, but the taxation office is the biggest mafia. Whenever
we want to pay our taxes, they try to delay it so they can get some [bribes] or force us to
find the commission workers which are linked to tax office officials” (R-3). Commission
workers are “informal agents acting as middlemen for access to government services”
(Ghiasy et al., 2015:22). Widespread corruption in all public sectors as lack of transparency
had affected multiple businesses interviewed. Entrepreneurs also believed that their business
would be more successful if there was no corruption (R-4, R-6, R-7). Interviewee R-7 argues
that the custom and taxation office system in Afghanistan lacks efficiency and
professionality to identify the taxes based on the profit of an enterprise. He explained that
they did not have the capacity to understand whether a business is doing well, rather they
consider the physical size of an enterprise and force you to pay taxes based on the square
meters of the enterprise. It is also common practice for an official of taxation office to visit
an enterprise and then demand taxes based on the sales of that day, where that single day is
judged as being the standard for the business, which total sales and taxes are then calculated
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from (R-4, R-5, R-1, R-2, R-3, R-7). Many of the interviewees complained about this
practice as it does not reflect the business inflows or outflows and therefore, they can be
unfairly taxed (R-6, R-7, R-4). Similarly, S-1 argues that Afghanistan lacks transparent
institutions, and despite paying taxes, they are still forced to bribe officials at taxation offices
to proceed with their paperwork. If they do not pay the bribes, the officials will delay the
paperwork or require the business owner to waste valuable time by visiting the taxation
office multiple times to follow up on their paperwork (S-1). There is also lack of trust from
the entrepreneur’s side towards the government taxation. According to respondents, they
pay 10 percent in taxes every time they top up their mobile phones (R-1-8, S-1-4). However
(R-3) argue that “we do not have any issue with paying taxes but to be honest, I do not know
in whose […] pocket these money goes to. Since we do not receive anything back from
them” (R-3).
While ICT allows entrepreneurs to call the offices instead of having to visit in person, it has
not helped with issues related to taxes and corruption. It has eased the processing of finding
and contacting commission workers which does speed up the process. Due to the corruption,
some of the entrepreneurs prioritize paying bribes to officials overpaying the legal
processes. In some cases, they may have to pay both, but it is cheaper to pay the bribes (WH-
1, S-1, R-6, S-4). However, it is also worth mentioning that most of the enterprises’ records
of business is a basic cash book, which also makes it difficult for the taxation personnel to
understand the inflows and outflows of a business.
6.5 Type of ICT Practice
The number of ICT services entrepreneurs use for their business operations and daily
communication differs between entrepreneurs. The computer usage for businesses purposes
in comparison to mobile penetration among Kabul entrepreneurs remains low, with only 6
of the informants interviewed using computers for their business purposes (E-1, WH-1, WH-
2, S-1, S-2, S-4). Computer usage is widely used among medium scale enterprises and those
entrepreneurs had knowledge of ICTs.
Mobile penetration levels are high and remain the predominant form of ICT used by Kabul
entrepreneurs; all interviewees owned and used mobile phones for business purposes. This
concurs with previous research findings by Komunte et al. (2012). Their research findings
found out that people between ages 15 and 44 are most likely to own mobile phones.
Regarding the type of mobile phones, such as smartphones and normal phones, used by
entrepreneurs, it was widely influenced by literacy and the income variation. Normal mobile
phones are much cheaper and affordable to the poorer population. As informant S-3 stated,
“I am an old illiterate person, I do not know how to use a smartphone neither I can afford to
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buy it”. I only use my phone to communicate with family members and sometimes with
customers, but the customer usually calls me because I cannot afford to call them” (S-3).
When it comes to the business purposes, particularly in interaction with other businesses
and customers, the Internet remains the predominant ICT service used by enterprises.
Almost all the entrepreneurs interviewed in this study apart from (S-3) used WhatsApp,
mostly for communication with suppliers and customers. WhatsApp is the second most
popular application after Facebook in Afghanistan to communicate with one another and
with the outside world (Gibbons and Mashal, oct 26, 2019). The popularity of WhatsApp in
other countries also makes it ideal for use with international suppliers.
The lack of use of different kinds of ICT services, is related to the issues regarding literacy,
awareness, affordability, and the size of the enterprises (WH-2, S-3, R-3). The entrepreneurs
operating within textiles, mobile stores, and cosmetic and accessories do not see any need
for computers in their enterprises (R-1, R-2, R-3, R-4, R-5, R-6, R-7). Rather they prefer to
use mobile phones because of its affordability and its flexibility to carry with themselves
outside and inside the store. One entrepreneur used both a computer and mobile phone for
his business but exclaimed that “We are going around all the time with my business, if my
customers call me, my phone is always in pocket, and everything is within my phone. I only
use my computer to email sometimes with my suppliers, but I mostly use WhatsApp because
everyone always has their phone, and it is easier to get in contact” (R-1). Additionally, age
did not always relate to the ICT type used by the entrepreneurs. WH-2 who is only 40 years
old, despite having similar education level as S-4, who was 52 years old, was less aware of
ICT usage and only use mobile phone for communication with customer and supplier.
Ease of use was also a determinant for some of the participants (R-3, R-5, WH-2). Due to
the conflict and price of computers, basic knowledge on using computers is not widespread
and this is also more evident among older generations. Some of the participants stated they
had no knowledge of computers (R-3, R-5, WH-2). Even among medium-sized businesses,
the owner did not have knowledge about the computers and relied on an employee to do that
work (S-4, WH-2). For these reasons, entrepreneurs with more knowledge of ICTs are more
likely to use different types of ICT services, despite others who may have a higher-level
education. WH-2 stated that during his education he did not have access to computers or
other ICT but when the ICT services emerged, he did not have the time to learn because he
had to generate day-to-day income (WH-2). Most people had to join educational courses
that taught basics on computers and Microsoft Office which is mostly used in business. This
is an additional expense that not all entrepreneurs can afford. In some cases, they do not see
the need for this, due to the ease of using a phone.
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6.6 Application of ICT to Business Operations
The UNCTAD report on e-Trade Readiness Assessment (2019) shows that most
entrepreneurs prefer social media such as Facebook for advertising their products and goods.
This study also found that all the entrepreneurs, except one (S-3) use social media such as
Facebook, Instagram, and WhatsApp for advertising, marketing, purchasing, and
negotiating with both customers and suppliers. Entrepreneur (R-1), who owns a clothing
store and imports all its products from Turkey and China, had this to say “I use mobile
phones and the Internet for purchasing products from outside the country. I research
products and the price on the Internet, then I contact the supplier through WhatsApp or
emailing. The supplier sends me the picture and price of the products and then I contact the
transportation company for transporting my products. Whenever, I call them or send them
message in WhatsApp they answer me because they know that I want to do a business deal
with them”. Similarly, S-1 states that “I use mobile phones for communication, trade, online
services, since most of our order take place online”. Most of the businesses operating within
Kabul including retailer, services, wholesaler, and food producer, does not have an official
website to provide online purchasing. Even within social media platforms does not allow
purchase of goods, and orders take place through WhatsApp and calling (R-1, R-2, S-2, S-
3, WH-1, WH-2). According to Orfan (2021) most people in Afghanistan use the Internet
for social networking sites and Facebook remain the most popular social media platforms
among youth population. This particularly makes it a valuable for entrepreneurs to target
their customers where most people socially interact. Additionally, social media provides
low-cost advertising, which make its attractive for entrepreneurs to expand their customer
base and output (Wh-1, R-2, S-1).
The online business utilizes ICT services as an intermediary tool to interact with both local
retailers and customers (E-1). They said that “The retailer contacts through mobile phones
to sell their products, we go to the retailer to take pictures of their products and publish them
on our website and social media accounts to sell them. Although the online business allows
the customers to do the payment online through bank cards or mobile banking, due to lack
of awareness of mobile phones money transaction, most people prefer to voice calling to the
enterprise for purchasing” (E-1). According to E-1, each product published on the website
and their social media account includes a COD number for payment and order. When a
customer wants to purchase a product, first the online platform, confirms the order placed
by the customer. Second, the online enterprise has to confirm the availability of the product
by contacting the seller. According to respondent (E-1), the customer usually calls and
negotiates about the price and shipment address. Once, the negotiation is done, the online
business contacts the producer through mobile phones to confirm the availability of the
product in the stock. If the product is available, the delivery personnel of the online business
collect the products from the producer and ships them to the confirmed address. In some
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occasions, the supplier may deliver the product to the customer on agreed address if the
online business delivery personnel are not available at the time (E-1).
Mobile money is being used for bill payments, government salary payments, and private
money transfers but it is still a new phenomenon in Afghanistan and is in an early stage of
development. The mobile money and card-based payment need time to gain traction with a
society that has in the recent past witnessed banking scandals. Until the time people restore
confidence in the banking system, cash remains the dominant form of payment in all sectors
and the majority of the businesses in Afghanistan are mainly face to face business. Although
mobile banking systems are provided by banks, the awareness and confidence in mobile
banking and other mobile money solutions is low (UNCTAD, 2019). Through interviews,
three out of seventeen entrepreneurs were using Mobile money for business purposes (R-1,
E-1, WH-1). E1 and WH1 highlight the benefits of mobile phone money and add that mobile
money is the key element to eliminate corruption in all sectors, particularly the case of the
current taxation office where corruption levels are high and remain a constraint to SMEs
development (E-1, WH-1). On the other hand, R-1 stated that mobile banking has been
helpful in time reduction, as well with the security situation which makes it dangerous to
carry cash at the present time. The current situation in Kabul is extremely dangerous and
armed robberies and killing are regularly reported and continues to jeopardize Kabul city
(Hamid, October 2020).
According to interviewees E-1 and P-1, very few people purchasing products online or
through mobile phones have access to mobile money banking systems and the majority of
payments are taking place by cash. Even with the online business, cash is still predominantly
used, and customers will pay cash for the products when they are delivered (E-1). Informant
E-1 stated that, “When we receive an order through the mobile, the first thing we ask is
where to deliver. Because of the current security situation, we do not deliver to everywhere
in Kabul city. We have our own parcel operators that parcel our goods to the customers
because there is no local logistic courier except DHL and we only parcel through DHL
outside the country”. Even then, security remains an issue with reports that there are the
occasional robberies, where at the delivery point, the delivery is attacked, and the robbers
steal both the products and any cash on hand (E-1, R-2). Informant R-2 stated, “I hope one
day everybody has access to mobile banking because everything is based on cash
transactions”, and with increasing insecurity, the safety of the delivery men’s lives is at risk.
6.7 The impact of ICT use on Business Performance
All the respondents claimed that ICT services have improved their business processes by
allowing them to receive appointments and orders through ICT services. The technology
further improved entrepreneurs’ competition reduced the cost of business and increased
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their customers and sales of products. As respondent (R-2) said that “before the ICT were
introduced, there were no standard quality of products, but now you can research and find
products with better quality and price”. Similarly, respondent S-4 exclaimed that ICT
improved their business publicity and advertisement which resulted in gaining more
customers. He further stated that, “without ICT life would have been like 50 years ago, due
to ICT services entrepreneurs are able to be more efficient and productive” (S-4). The
entrepreneur argued that before the ICT service, the scope of the opportunity was limited
and they were not able to access or find business opportunities and networks (R-4, R-6, WH-
1, F-1).
Through the interviews, most of the entrepreneurs exclaimed that they rather want to be the
first person in doing business with the supplier and that ICT has provided them the
opportunity to do so. This is the case of for the clothing retailers and mobile retailer, the
respondents claimed that they now can either travel to collect their goods directly or
purchase goods through ICT services from the suppliers (R-1, R-2, R-3, R-4, R-5). This is
also evident in the case of wholesaler, According to WH-1, they used to have contacts with
the middlemen and purchase of the goods took place through that but since they have been
able to travel and have access to ICT, they no longer rely on middlemen. However, the ICT
services has introduced a new form of intermediaries’ sector, where as E-commerce
emerged and play the role of middlemen in B2C business, especially, those retailers sell
their products through online businesses (E-1). Additionally, there are also Wholesaler who
has the potential to play the intermediaries role within the country, but it could be also
consider as B2B exchange (WH-1, WH-2, WH-3, R-5).
6.7.1 Retailers
This study found that all retailers were using mobile phones due to their flexibility and
affordability. In this regard, Asheeta (2008) argues that mobile phones are easily accessible
and cheaper compared to computers and they can be used by both rich and poor. The
motives of retailers using mobile phones is connecting them with society and the outside
world. Through interviewees, retailers also mentioned mobile phones and the Internet usage
for marketing of their products through their social media platform and keeping on
competition. Mobile phones are also used for communication with suppliers and customers
as well as with family and friends. All the retailers stated that they communicate with their
supplier within and outside the country through calling, SMS, and with outside the country,
they use WhatsApp because the cost of calling and chatting through WhatsApp is cheaper
than the mobile operator. Respondent (R-4), who is dealing with the mobile phones
business, argues that people prefer to buy smartphones nowadays because smartphones are
able to do the work of a computer and are more flexible to carry out.
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According to R-1 around 4 percent of their sales take place online through their social media
pages. He further argues that the current security situation makes ICT an essential tool in
order to do business (R-1). In addition to the expansion of marketing due to ICT, new
customers are also being reached. One of the interviewees mentioned how women would
prefer to call and place orders at his store, rather than come in-person, due to security reasons
(R-6). Regarding ICT improving time efficiency, there is a discrepancy between
entrepreneurs. R-1 and R-2 import textiles from abroad and argue that they cannot trust the
quality of products ordered through mobile phones and the Internet. When the businesses
purchase products from the supplier outside the country, they are sent pictures of the
products with a better quality than what is received. They rather want to go themselves to
be certain with the quality of the products they need (R-1, R-2). Other retailers reported that
ICT saved them time and costs since they no longer needed to travel to get supplies or find
new markets (R-4, R-4, R-7).
Additionally, the COVID-19 pandemic has had a significant impact on entrepreneurs and
their decisions to use ICT in their businesses. As it was spreading geographically and
preventing people from going to work, it made the impact supply chains consequences
unpredictable (WHO, 2020). The retailers argued that during the pandemic time, as the
Afghan government imposed lockdowns despite a majority of businesses relying on face to
face interaction, they have been able to continue with their business through ICT services
(R-1, R-2, R-3, R-4, R-5, R-6, R-7). They were still able to make and receive orders when
they were not able to physically open their stores (R-1, R-2).
6.7.2 Online Businesses
The online businesses normally operate through the ICT services including computers, the
Internet, and mobile phones which play a key role in their business operations. They also
use ICT to collaborate with other businesses and local retailers within Afghanistan (E-1).
The main driving force of ICT for online retail is that this is a new type of business which
functions as a customer and retailer relation tool and creates employment in an environment
where unemployment rate is high. There is flexible mobility for both retailers and customers
and enables retailers to reduce their marketing cost and boost their business (E-1). Due to
the security situation and the COVID-19 pandemic, there is a lot of potential in the E-
commerce sector. News reports that high ranking and wealthy government officials prefer
to shop for necessities online rather than going to physical stores. This is also starting to
spread to the middle classes who are gaining online literacy (Tolo news, 2017).
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6.7.3 The Service Sector
The service sector includes entrepreneurs dealing with ICT reparation, photocopy, printing,
and photography. The entrepreneurs S-1 and S-2 sees ICT services as an important
mediating tool for their business and communication with customers and other businesses.
The kinds of ICT services used mostly by S-1 and S-2 are the Internet, computers, and
mobile phones. According to these entrepreneurs, ICT services, particularly the Internet,
have been helpful in the reduction of businesses cost and time. S-2 stated that he sometimes
receives pictures or other documents through ICT from the customer for printing, which the
customers then pick up. This has also helped with managing space and crowding in the store,
which affects customer experience and atmosphere (S-2). In the case of S-1, who is dealing
with software and hardware of computers and mobile phones, he uses the Internet and
mobile because it is cheaper for his business. He does not have to travel to buy supplies,
instead he can order it through the Internet.
6.7.4 The Construction Company
The construction company has been operating since 1998, when ICT services were limited
in Afghanistan. The main drivers of ICT usage are the information flows, time reduction in
their operation, mobility, and cost reduction in travels (S-4). When the ICT services were
first introduced in Afghanistan, the construction enterprise communication was only limited
to voice calls to remotely monitor work but since the ICT services have developed and
different kinds of ICT services such as the Internet are available, they can easily monitor
their project through video call without traveling to the worksite. As he stated, “before we
had to travel to our worksite and the security situation as we know, is not favorable for a
businessman beside that the transportation cost us a fortune to monitor our worksite in
different areas. The ICT has simplified our work and we do not have to think if we are going
to be kidnapped on our way, we can easily monitor our worksite and the ICT has expanded
our work opportunity, expanded my network and gained more customers” (S-4). The
respondent further demonstrated that ICT enabled him to do market research and compare
price before applying for a project which offered by different organization or government.
Personal mobility is constrained by security factors in Afghanistan, as kidnapping, and
armed robbery are common. The fact that he is an entrepreneur with a medium sized
business, puts him at increased risk as the local mafia would be aware of his business and
the financial implications owning such a business. He stated that he previously received
threats over the phone from these groups (S-4). With ICT lessening the work travel
requirements, the threat is reduced as he is not traveling as much, due to modern technology
allowing him to monitor the work remotely.
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6.7.5 The Wholesaler
To illustrate the motives of the wholesaler usage of ICT services, one could argue that ICT
services play an intermediary role in their business, since the whole operation of the
wholesaler’s business is the import of products from outside the country and sales to small-
scale entrepreneurs. The main motives of the ICT services described by the wholesaler is
communication, market research, information flows, preventing waste of time, and the
expansion of the customer network. The interview with (WH-1) illustrates the utility ICT
services as the respondent said “we are connected with our supply chain within and outside
the country through ICTs services, and ICT has been supportive in keeping track of the
goods during import from or export to other countries (WH-1). The ICT services have been
valuable in market research and increased the quality of the products through extended
communication networks. Interviewee (WH-3) said that ICT services played a key role in
securing a higher quality of stock for their business. They were able to contact new suppliers,
who could provide better quality textiles and cosmetics, which also resulted in them selling
more products. They could also sell this new stock at a cheaper price due to having multiple
suppliers with better quality, whereas before ICT, they were limited to just one local
supplier, which dictated the price. Visa and travel restrictions also played a part in previous
business contracts, since the wholesaler could not easily travel abroad to look for new
sources for their business. If they were able to travel, there was also the additional costs of
travel and accommodation, which was included in the business expenses. With the use of
ICT, this limitation is not as consequential as it allows them to still make and continue
networks outside of Afghanistan. They also no longer have to rely on travel abroad to make
business contracts, which lessens their total business expenditures.
6.8 Challenges of ICT services
Alongside the positive development of the ICT sector in the business environment, there are
several challenges that impede the ICT usage of the entrepreneurs. The continuing conflict
inhibits the business environment as entrepreneurs must face risks of violence and security
threat to continue their operations (E-1, R-4). However, some entrepreneurs have seen issues
of security as a way to enter into an untapped market through online arenas, as mentioned
earlier. The conflict also contributes to poor infrastructure regarding electricity, access to
the Internet and limits the regions which can afford and reliably use ICT services (E-1, R-
4). Electricity is unreliable and it is common for there to be power outages, which limits the
business ability to complete their work (E-1, R-1, R-2, R-5). One interviewee said that
“because the infrastructure is not properly matched, and the Internet sometimes does not
work for two or three hours during the day and [we use the most] the Internet … in orders.
In general, sometimes the speed is very low, and we cannot take orders from our customers”
(E-1).
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Additionally, mobile network operates have poor coverage across the country, which has
been underdeveloped in the context due to prolonged conflict and instability. Mobile service
does not work properly, and service is inconsistent (S-4, R-7, F-1). Due to this other
infrastructural failure, entrepreneurs cannot rely on using their mobile phones or service to
provide Internet when the electricity is down (E-1). Lack of poor infrastructure not only
limits entrepreneur’s ability to increase their customer network but it outspread to impact
entrepreneurs’ skills and capacity to enter global market. The issue of trust in ICT also
creates an impediment for entrepreneurs to use ICT for business purposes. WH-2 who is
dealing with import of medicine from India stating that computers that cannot be trusted, “I
used to keep records of my business in a notebook but since the emergence of computer in
Afghanistan, I had to employ someone who had computers knowledge to keep the records
in computer because I myself do not know how to use it. However, he argued that computers
cannot be trusted because if there is a program failure then all your business records will be
gone. “I kept my business record in the computer but there was a failure in the computer
and all my business data was gone since then I still keep a copy of it in my notebook” (WH-
2).
Online literacy is another issue regarding ICT usage for businesses. Many people do not
fully understand how the processes work and therefore, do not trust to use them to make
transactions. There is also a lack of online capacity, where people are unaware of the
opportunities online or do not know how to engage with online systems, which hampers
their access. Skepticism about the validity or quality of items online is another concern,
where potential customers may doubt what is being posted or not trust the pictures of goods.
Many people prefer to see the items for sale in-person before purchasing them.
The fragility of state institutions to tackle the literacy barriers, and poverty in the country
remain a constraint in businesses trying to reach new customers. According to respondent
(E-1), there is a lack of affordability of ICT service, and particularly “Smart phones” among
the majority of the people. Other research has found that mobile phones broadband
penetration among the poor population are not multifunctional (smart phones), and it could
be due to the high cost, widespread illiteracy, and limited network capability (Carmody,
2012; Smith, 2009). According to World Bank data, “at the time of last household survey
(2016/17)” more than 55 percent of the population [in Afghanistan] live below the national
poverty line and is expected to have worsened due to COVID-19 outbreak (World Bank,
2020).
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7 Analysis
This chapter analyses the findings by using the Activity Theory as an analytical framework
to provide an account of the components that make up an activity and identify potential
contradictions that occur within the activity. This chapter also answers the two of the
research questions, which are structured within the analytical framework components. The
two research questions answered in the section are: How do SME entrepreneurs perceive
the impact of ICT usage on their business productivity? What are the constraints of ICT
usage in businesses in Kabul, Afghanistan?
7.1 Relationships between Subjects and Tools
ICT services are the mediating tools used by the Afghan entrepreneurs in Kabul to support
the objective's transformation into desired outcomes. It was confirmed through interviews
that all seventeen entrepreneurs between the age of 21-55 owned mobile phones. The
entrepreneurs invested in ICT services to generate profit in their businesses through cheaper
communication, business networking, marketing, reduced transportation, and delivery
services. Entrepreneurs were able to communicate and interact with suppliers within and
outside the country at a lower price. Also, it increased the speed of communication and
reduced the waste of time and cost of information in the value chain. In addition to the
expansion of marketing, the ICT services have increased the entrepreneur's capacity to boost
their business productivity by increasing customer outreach through social media platforms
and online websites. ICT services have improved the ease of doing business where
entrepreneurs can easily monitor their projects through video calls without traveling to the
worksite. ICT services delivered information flows that enabled the entrepreneurs to do
market research, which improved their quality of goods and customers' welfare by price
variation in different markets. The information flows enabled the entrepreneur to exchange
information with suppliers without paying a fortune for traveling costs. Before the
technology, the entrepreneurs included their expenses at the cost of the goods (R-6).
However, the decade's war in Afghanistan has affected the entrepreneur's access to
education, employment, and business development. Therefore, many lack sufficient ICT
services to assess and apply to use these artifacts accurately. The entrepreneurs' access and
usage of different kinds of ICT services are based more likely on the knowledge, awareness,
and affordability of the ICTs rather than the entrepreneur's preferred group. For instance,
WH-2, who is 40 years old, and despite having a similar education level as S-4, who is 52
years old, were less aware of ICT usage. They only used mobile phones for communication
with customers and suppliers. While S-4, who was older, was more aware of ICT services
and use different kinds of ICT services for business purposes.
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Concerning computer usage in businesses, the awareness and confidence of entrepreneurs
remain low due to various reasons. Computer usage is perceived by most business owners
as a costly artifact and less useful for their business since smartphones can provide all the
applications that a computer offers and is more affordable. Also, the issues of trust related
to ICT services and program failure hinder entrepreneur's use of computers. As use and
practice with computers are less common, some entrepreneurs reported not trusting
computers and had a negative experience when trying to use them for business purposes.
The entrepreneurs' relationship with ICT services was primarily rooted in mobile phones
and social media platforms by referring to the analytical framework. The contradictions
between the subject and tools can be understood as lacking basic ICTs literacy, trust, and
accessibility. According to Karanasios, (2014), these tensions are classified as secondary
contractions, representing friction between activity elements.
7.2 Division of Labor and Tools
The division of labor is tasks that are necessary for a business to fulfil. They are realized
through the subject's operation within the enterprise and community and in different
businesses and operate within Kabul city and share responsibility for accomplishing the
desired profit and other outcomes. This process is understood through the import of products
from suppliers and further uses of different types of ICT services to complete the business
process steps. The tools related to labor division to accomplish the tasks are playing the
mediating role; for instance, entrepreneurs using voice calls, SMS, and WhatsApp for
purchasing their products from their suppliers. The entrepreneurs use different social media
for advertising their products in order to sell them to buyers. Social media for advertising
expanded the business' outreach and potential customer base with a reasonably cheap
marketing strategy. Customers can order their products through WhatsApp application and
voice calling, in response the supplier delivers the products through the delivery service to
customers agreed address. All these steps are examples of how ICT services have recently
changed the division of labor for a business. They have served to ease these processes by
facilitating faster communication and expanded areas for marketing, which in some ways
has simplified the business processes. However, this also depends on the subject's
capabilities regarding ICT services and technology. The current insecurity situation and
COVID-19 pandemic have increased people's interest in making purchases through ICT
services rather than going to the physical store. It has also resulted in the emergence of new
markets such as online business and delivery service, which further generated more
employment for the more impoverished population.
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7.3 Community (Business Environment)
The community represents the business environment who share the same objective which
includes competitors, potential customers, and intermediaries. As it was not possible to
interview the competitors or customers of the businesses, this information was received
through the entrepreneurs themselves. The community represents the business environment
that shares the same objective, including competitors, potential customers, and
intermediaries. As it was not possible to interview the businesses' competitors or customers,
this information was received from the entrepreneurs themselves. The ICT services have
improved business processes, enhanced customer services, and increased competition
among entrepreneurs. Additionally, it enabled entrepreneurs to purchase their products from
the supplier through the services facilitated by ICT, thereby reducing middlemen's role.
However, some businesses have only been evident, such as mobile phone retailers and some
clothing retailers. Some of the entrepreneurs still consider the role of a wholesaler as a
middleman. Although ICT improved time efficiency and reduced transaction costs among
suppliers, some entrepreneurs do not trust the quality of the products ordered through mobile
phones since the quality might differ from the suppliers' pictures. Some still prefer to travel
and pay higher costs to be confident in the quality of the products they want. This represents
contradictions between the community and the tool and quaternary contradictions between
the related activities of ICT usage.
In addition to the information flows that emerge through ICT services, it has also enabled
entrepreneurs to conduct better market research and provide a better quality of products,
enhancing customers' welfare. Social media is hugely popular and is one of the main drivers
for having a mobile phone. This created a massive opportunity for entrepreneurs to take
advantage of widespread social media usage. This process is understood by entrepreneurs
using ICT to create a social media platform to advertise their enterprises and goods. In this
regard, the ICT services securing the role of the intermediaries and attracts potential
customers. Simultaneously, it has increased business competition as customers have access
to more business through ICT. Furthermore, due to technological advances, new competitors
have emerged in the business market through online business.
The number of entrepreneurs' customers is growing as more people are interested in
purchasing their goods through ICT services due to security reasons. However, it has only
been favorable to high- and middle-income people, and the role of ICT for those living
below the poverty line remains unpredictable. The widespread poverty and high costs of
ICT services created tension between ICT tools and potential actors within the business
environment. The political situation, especially the security condition, created the business
environment uncertain and unpredictable for entrepreneurs. Increases in armed robberies
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and attacks on delivery personnel created an impediment for entrepreneurs to expand their
businesses.
Considering the Afghanistan economy and ICT infrastructure, especially the unreliability of
the electricity and access to the Internet, one can easily understand the contradictions that
occur, limiting the stakeholder's accessibility to use the ICT services reliably. Low quality
of mobile network coverage across the region constrains the business environment as
entrepreneurs must rely on their mobile phones to provide the Internet. Similarly, the
Internet's low quality plays a factor that limits entrepreneurs and potential customers from
doing business through ICT. Trust in ICT is also absent among customers, while
interpersonal interaction helps establish and reproduce trust. Especially, skepticism about
the validity or quality of items online is a concern, where potential customers may doubt
what is posted or not trust the pictures of goods. Many people prefer to see the items for sale
in-person before purchasing them.
7.4 Rules and norms
Although ICT services have created a new form of social networking and are heavily used
for B2B and B2C exchanges, ICT norms revolve around WhatsApp usage as the principal
communication application and Facebook as the leading social media platform. Both
platforms are used to order and sell products through these applications provided by smart
mobile phones. Entrepreneurs also use voice calling to conduct business to save time.
However, many entrepreneurs still favor interpersonal interaction at the first contract
agreement to see the products in-person to examine the quality. Additionally, most
entrepreneurs prefer to negotiate the price in face-to-face interaction with other businesses
than through the ICT, especially if they want to order a larger volume of goods. Another
potential reason for this is that the wholesaler lacks a professional website for the purchase
of goods. Most enterprise's websites provide a short description of what type of goods are
available, but the ability to purchase online is absent. However, this differs in the case of
online business retailers since their websites do allow online purchasing.
There are also tensions that occur within the norms and subject in relation to the objective
to reach the desired outcomes. In the entrepreneur's search for a market to purchase or sell
their product and improve their business performance, they require knowledge of the market
prices. This knowledge is reliably acquired through the access of information facilitated by
ICTs such as mobile phones, the Internet, and computers. On the other hand, the know-how
may be absent in the older generation and those with a lack of literacy to use smartphones.
It is also important to mention that, despite the Afghan government's improvement in E-
governance, such as providing access to information and necessary document for the
registration process, it's still in the infant stage of development. Institutional inflexibilities,
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market imperfection, or regularity bias impede business development (Bhattacharya, 2019).
The Afghan government lacks sufficient transparency and institutional capacity to eliminate
corruption, particularly in the custom and taxation office, which impedes entrepreneurship
development. Easing the institutional inflexibilities and regulatory bias and creating a more
flexible market that's not held back by imperfection would drive business as an engine of
development (Bhattacharya, 2019).
7.5 Outcomes of ICT service
This section determines the outcome of ICT services used by Afghan entrepreneurs in
Kabul. The objective is the purpose of using ICT, answering this question, "why is this
activity taking place?" (Karanasios, 2014). It represents the business operations that ICT
services are used to generate an outcome. The entrepreneurs engaged business to gain profit,
and ICT service particularly mobile phones and the Internet, were by the business
environment mediated activities, leading to the entrepreneur's profit. Facilitating time
efficiency, increased customer outreach and base, increased capacity of businesses and
information flows, provided cheaper communication, increased publicity, reduced the cost,
decreased the role of intermediaries in some business, increased competition, and provided
economic opportunities and new business market.
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8 Conclusion
This study's main contribution was to learn how ICT services have adapted businesses’
activities in Kabul, Afghanistan, and to contribute to literature on how ICT in developing
countries affects productivity. The research applied an analytical framework based on
Activity theory to understand the role of ICT service in developing small and medium
enterprises in Kabul, Afghanistan. The analytical framework's help answered the research
questions based on the Activity theory component, which examines multiple aspects and
outcomes that can affect an entrepreneur's decision to use ICT services. The findings and
analysis provided answers to the other research questions, starting with research question 1.
1. What do entrepreneurs perceive to be constraints and challenges to entrepreneurship in
Kabul, Afghanistan?
The findings chapter was provided to answer the research question. Lack of institutional
capacity to determine a sufficient and adequate taxation system was found to be a significant
constraint for entrepreneurship in the country. The business environment remains
ambiguous and unpredictable due to the political instability and increase of insecurity
remains critical for an entrepreneur's investment decision. Despite the improvement in doing
business, the country still suffers from poor infrastructure, including access to electricity
and poor connectivity. Additionally, weak economic institutions to maintain the rule of law
and combat corruption is another factor that reduces the incentives of entrepreneurs to
invest. It was important to include this question as a research question since activities, such
as ICT usage, have multiple motivations and there are multiple factors, including social,
cultural, and political, which affects the activities and how they are done (Karanasios, 2014).
2. How do SME entrepreneurs perceive the impact of ICT usage on their business
productivity?
The analysis reveals how ICT services have impacted entrepreneurs and their activities. ICT
is used as a mediating tool by entrepreneurs has been significant in increasing business
productivity by facilitating cheaper and faster communication and reducing transportation
costs. The ICT services, particularly mobile phones and the Internet, facilitate cheaper
modes of communication and delivery of information, decreasing intermediaries' role. The
result is a decreased cost of doing business. The business processes of entrepreneurs have
also been improved by placing orders through calling and WhatsApp. ICT services have
also improved the entrepreneur's information capacity and entrepreneurship skills by
enabling them to conduct better market research, thus improving the goods' quality. Those
with mobile banking services have increased the entrepreneurs' welfare by facilitating the
purchase of goods from the global market and improving the individuals' safety due to the
current security conditions, making it challenging to carry cash.
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ICT services have enabled business performance by increasing publicity and the customer
base with low-cost advertising. The services facilitated by ICT services changed economic
activities by allowing entrepreneurs to access information and enable them to compare
prices, save money, and expand their businesses, thereby increasing competition. The ICTs
further improved entrepreneurs' flexible mobility by allowing them to reach suppliers and
customers, as well as to place and receive the order at anytime, anywhere. Additionally, ICT
has enabled innovation through the emergence of E-commerce and created new employment
opportunities by facilitating delivery services.
3. What are the constraints of ICT usage in businesses in Afghanistan?
There remain a number of constraints in ICT usage for business development. The
protracted violent conflict in the country has resulted in poor infrastructure regarding access
and reliability of the Internet and electricity, which creates an impediment for entrepreneurs
to use ICTs for business purposes. It also impedes the ICT sector's development, which
services a reinforcing mechanism feeding into limited ICT capacity. Mobile phones with
inconsistent networks are another restraint to allowing entrepreneurs to rely on their phones
for business purposes. Literacy and poverty are other challenges that affect entrepreneurial
business activities when trying to reach new customers, mainly if most of the population
cannot afford ICT access. Entrepreneurs lack awareness and sufficient skills to use access
in a professional way, which remains a constraint for enterprises entering the global market.
This can be seen through the low usage of computers in their businesses and lack of ordering
in their websites.
Contradictions within ICT usage and the regulations and norms, limits entrepreneur's ability
to use ICT services to their full potential. Tension within the subject and tools that constrain
entrepreneurs' capability to use ICT can be understood through trust issues with ICT
services and the quality of goods ordered through mobile phones. Contradictions within the
business environment in relation to using ICT are limited by the security conditions, which
hinder entrepreneurs' ability to achieve desired outcomes from the services facilitated by
ICT. Concerning poverty, the high cost of ICT services restrains potential actors from
participating in the business environment. It also limits current actors' ability to increase
their business operation with ICT services. Lack of online literacy among the population
limits entrepreneurs from expanding their business. This also represents contradictions
between the potential actor's usage of advanced technology versus old technology, lacking
awareness/confidence in smartphones and computer usage. Likewise, there is also an issue
of trust among customers in the quality of the goods provided through ICT services, which
created tension in the business environment in relation to the objective.
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This study aligns with previous research on ICT and business development, showing that
the usage of ICT services, particularly mobile phones and the Internet, can positively impact
businesses in developing countries. Although this study found that ICT strongly mediates
SMEs' productivity, society norms and institutions are a significant barrier to utilizing them
to their fullest potential. For example, poor infrastructure limits the ability to use ICT, which
further makes the sector uncertain. The recent rise of ICT and especially mobile phones in
the country also means that computers, which have more potential for business use, are
uncomfortable for people to use due to limited skill sets. These insights contribute to the
existing literature on ICT usage in businesses in developing countries. While more
interviews would have supplied more data saturation, a number of the challenges and uses
of ICT would have been similar. For these reasons, some generalizations to other businesses
in Kabul can be made from this research, including the challenges to entrepreneurship,
challenges to using ICT for business and ways in which ICT services are used for business
purposes.
Since this study only focused on the Urban area, further research could investigate the
relationship between the age and other social-economic factors in ICT usage for
entrepreneurship. Another area of interest would be to extend the study beyond Kabul and
into the rural areas, which may yield rich research findings, as the rural infrastructure and
norms and rules around ICT may be different. A study focused on women-owned businesses
and ICT usage using this theory would also be very interesting to explore how ICT may
help them in the very male-dominated business climate in Afghanistan.
Through this research, scholars and practitioners can have a better understanding of how
ICT usage in businesses in similar contexts is crafted by the rules and norms, the
community, the subjects, and division of labor. It also provides insights into how those
within the development field can better address and respond to the needs of subjects, in this
case the business owners, to increase the effectiveness and impact of income generating
initiatives.
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Appendix 1
Interview guide:
1. What is your age?
2. What is your educational level? Have you completed primary, secondary? Higher
education?
3. What does your business entail? How long have you been operating?
4. Is this a family business?
5. How many employees do you have?
6. Is your business registered? How is it registered?
7. What are the biggest challenges to register your business?
8. What other businesses do you work with to support your business (Value supply
chain)?
9. How did you begin working with other enterprises?
10. What kind of interaction do you have with other enterprises?
11. Do you use any ICT service for your business?
12. What ICT services do you use in your enterprise? And how do you use it?
13. How long have you been using this ICTs for your business?
14. Does mobile phones or any other ICTs helped your enterprise’s productivity? Such
as gaining more customers, reduction in time and transaction cost?
15. Does ICT help your enterprise to gain more customers?
16. Do you use ICT/Mobile phones in price and market research?
17. Do you use mobile phones or any other ICTs to interact with other enterprises?
18. What are the benefits of using this technology?
19. What are some challenges of using this technology?
20. How have things changed since the emergences of ICTs/mobile phones?
21. How would your business be different without ICT/mobile phones?