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.

42(52)

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?