Herat, 27 October (AKI) - A bilateral agreement was signed on Tuesday between Italy and Afghanistan which will provide small loans to poor Afghans in the western provinces of Herat, Farah and Baghdis, where Italian troops operate.

The initiative will "allow to give micro-lending to tens of thousands of families and small enterprises favouring the development of the local economy among the most disenfranchised sector of the population," said a media release by Italy's embassy in the Afghan capital Kabul.

The agreement was signed by Afghanistan's finance minister Omar Zakhilwal, Italy's ambassador to Afghanistan, Claudio Glaentzer, as well as a special envoy of Italy's foreign minister Franco Frattini, Attilio Massimo Iannucci.

Micro-credit loans are aimed at spurring entrepreneurship among poor people who are unable to get access to traditional credit owing to low incomes, a lack of steady employment and collateral.

"The fight against terrorism and the country's stabilisation are a long-term plan providing humanitarian and economic assistance. Many insurgents would leave the guerrillas if they had a job," said special envoy Iannucci.

The fund will be managed by the Micro Finance Investment Support Facility for Afghanistan (MISFA), an independent organisation set-up in 2003 to get donor coordination.

Since 2001, Italy has contributed more than 466 million euros to cooperation activities in Afghanistan in the areas of justice, infrastructure and health.

In addition, more than 53 million euros will be destined to Herat for the "Development of agriculture, governance and institution building," said the media release.

There are around 3,000 Italian troops serving in Afghanistan, mostly in the west of the country.