Courtesy of The Financial Times, a report on a British private equity company that has taken a stake in an Afghan pharmacy chain:

A British private equity company has taken a stake in an Afghan pharmacy chain in a deal touted as evidence that the country is opening to business and foreign capital in spite of its ongoing political violence.

London-based InFrontier wants to expand the 786 Pharmacy brand into Afghanistan’s first national drug-dispensing chain while also looking for other companies to invest in across the war-ravaged country.

InFrontier’s founders, Felix von Schubert and Benj Conway, say events such as last week’s deadly Taliban attack on the Afghan parliament are obscuring gradual recovery in the economy from decades of conflict.

They say they have found a fertile market for foreign investment with young local entrepreneurs in desperate need of capital to build businesses.

“We want to show that Afghanistan is not a basket case,” said Mr von Schubert. “We’re aiming for a return on investment but we also want to make a social impact.”

The 786 chain has eight stores in Kabul with plans to reach 50 within five years. InFrontier is paying several hundred thousand pounds for a 40 per cent stake.

The company is aiming to become the first western-style Afghan pharmacy chain with a reputation for high-quality medicines in a country where over half of drugs are counterfeit or illegally imported.

Mr von Schubert started out as a banker with JPMorgan and went on to manage a $600m private equity fund before setting up InFrontier with his friend Mr Conway, a former UK diplomat and emerging markets investor.

They have attracted capital from wealthy individuals and family offices to build a multimillion-pound fund focused on opportunities in “frontier” or “pre-emerging” economies where most foreign investors fear to tread.

“The perception is that it is impossible to do business in Afghanistan,” says Mr Conway. “In reality there are businesses that have survived all the instability and new ones are emerging. A decade ago there were no banks. Now there is a functioning financial system and currency.”

This upbeat assessment is starkly at odds with international concern over the resurgence in violence and renewed territorial gains by the Taliban since the departure of most foreign forces last year.

Yet, Mr Conway insists that headline-grabbing bomb and gun attacks are mostly directed against Afghan security forces and political targets, making little impact on day-to-day life.

He and Mr von Schubert have spent much of the past three years shuttling to and from Afghanistan scouting opportunities in the healthcare, financial, telecoms and education sectors.

They chose to make 786 Pharmacy their first investment after 18 months of due diligence and relationship-building with its 29-year-old founder, Zabi Ullah Hidayat, whose family have a background in pharmaceuticals.

The brand name stems from the so-called Abjad numbers assigned to letters of the Arabic alphabet. The numerical value of the first sentence of the Koran is 786.

7.26

Number of doctors and nurses per 10,000 people in Afghanistan, compared with a WHO recommendation of 23

As well as dispensing medicines, the company’s modern, brightly-lit stores provide basic medical services through in-house doctors and female pharmacists are being recruited to attract women.

The strategy aims to tap high unmet need for modern healthcare in a country with just 7.26 doctors and nurses per 10,000 people, compared with a World Health Organisation recommendation for a minimum of 23.

Afghanistan’s economy has grown by more than 3 per cent in each of the past two years and Mr von Schubert says the country benefits from a young and growing population; 42 per cent of its 31.8m people are under 15.

Liberal regulatory rules largely drafted by US and British technocrats are helpful to business, says Mr Conway. Corruption is a problem but no worse than in other economies at its level of development, he adds.

Tens of billions of dollars of international development aid have been poured into the country but Mr von Schubert says private investment is needed to spur sustainable growth.

While Afghanistan is the prime focus, InFrontier also sees long-term opportunity in other post-conflict countries such as Chad, South Sudan and Angola.

“They are not as different as people think,” says Mr Conway. “The biggest risk is investing in the wrong company at the wrong valuation just like anywhere else in the world.”