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With his tattered gray turban, his threadbare waistcoat and the gnarled hands of a laborer, Karim Khan hardly looks like the ideal customer for a financial-services firm. But to the Azizi Bank in Kabul, he's a prime client. Khan is one of some 60,000 Afghans who have opened an account at Azizi since a new savings product was launched four months ago. Although his initial deposit of $100 in crumpled Afghani notes may seem paltry, because of customers like him Azizi is increasing its deposit base faster than any other bank in the country. "You have business opportunities here in Afghanistan like nowhere else in the world," says Hayatullah Dayani, the bank's chief of business development.

Dayani is one of thousands of optimistic souls who believe a prosperous future can emerge from the stony soil of strife-torn Afghanistan. Since the brutal Taliban regime was toppled five years ago by Western coalition forces, the government of President Hamid Karzai, beset by warlords and Islamic militants, has struggled to maintain order and control. The country's primitive economy is dominated by illicit opium production, which by some estimates accounts for as much as one-third of GDP. About 40% of Afghans are unemployed. And last month, the World Food Program warned that millions of rural Afghans might starve this winter because a prolonged drought has devastated the wheat harvest.

Yet the country also harbors a hardy strain of entrepreneurs like Dayani who have sparked an economic revival of sorts. Afghanistan's average annual per capita income has almost doubled from $180 in 2002 to $355 this year, according to the International Monetary Fund. The IMF also estimates the economy grew 17% in 2006, and it's projected to grow 11.7% in 2007. In Kabul, the capital, new shops open every day, and construction is altering the city's low-rise skyline, which not long ago consisted mainly of bombed-out buildings. More than 1.5 million Afghans own mobile phones, six independent TV stations have launched since 2002 and 16 private banks are expected to be open by early next year. "It's not like investing in Austria or the United Arab Emirates where things are pretty straightforward," says Mohammad Rafi Fazil, economics officer for the Asian Development Bank (ADB) in Afghanistan. "Given that we are only just emerging from a postconflict situation, things are very complicated. But the possibilities are endless if you are able to adapt."

That's what Azizi Bank's founders were forced to do when they opened in June. Islamic law prohibits the collection and payment of interest, making it difficult for banks to attract deposits from devout Muslims. Instead, Azizi launched a program they called Qismat (or "luck") Banking, in which customers opening new accounts are automatically entered in a lucky draw for cars, TVs, gold jewelry and other prizes. It may sound more like a lottery than a savings account, but no fees are charged, and customers can withdraw their money any time after three months. Since the program launched in August, Azizi has drawn $20 million in Qismat deposits alone, capital that it can in turn lend to its less religious banking customers, at a profit. "That's another $20 million mobilized in the economic cycle of the country," says Dayani. "People are coming who have never seen a bank before. They are pulling their money from under the floorboards and we are putting it into circulation through loans." But the ADB's Fazil worries that the system is unstable: Afghanistan's banking sector is largely unregulated, and loan officers have little experience in assessing the risks of business lending. "If the private sector goes bankrupt, [Afghanistan's private banks] will go bankrupt," he says, "and the public, with all their 'safe' deposits, what will happen to them?"

But there are few sure things in Afghan commerce. Not even a powerful international brand like Coca-Cola is guaranteed success. In September, Habib Gulzar Non-Alcoholic Beverages, Coke's franchisee in Afghanistan, opened a $25 million dollar bottling plant on the outskirts of Kabul. The modern facility—the first such factory to open since the fall of the Taliban—is large enough to produce 40,000 cases of soda a day. But the factory is operating at less than 20% of its capacity. Asked to estimate when the investment might be recouped, Salman Rawn, country manager for Coca-Cola Afghanistan, demurs. "Our break-even point is far in the future," he says, noting that he's currently selling the bottles of soda at a loss because volumes are so low.

There are numerous reasons why profits may prove elusive for Coca-Cola's Afghan venture. The country's rustic road network means that product distribution is limited to Kabul and a few other nearby cities; Kandahar, a potentially large market in the south, is off-limits because militants and bandits make it too dangerous to truck goods there. In many places, Coke smuggled in from neighboring Pakistan is available in shops at significantly lower prices than the Afghan-produced bottles. The cost of safeguarding Coca-Cola's local bottling plant and employees from attacks has soared as suicide bombings have increased in Kabul. And some of the government's pro-business promises have not materialized, says Sayed Mustafa Kazimi, the former Commerce Minister who signed the Coca-Cola license on behalf of the government. "I didn't go to the [factory] opening ceremony because I didn't want to be embarrassed when they said that I brought [Coca-Cola] to Afghanistan," says Kazimi, who claims his successors in the commerce department disregarded his commitments. "We promised them electricity, we promised them security. We offered tax holidays and tariff reductions. It didn't happen. How can anyone operate under these conditions?"

Rawn defends Coca-Cola's $25 million investment in Afghanistan, saying the objective was not just to make money, but also to help industrialize the country. "If you plant a tree you can't expect to have fruit the first day. But if you don't plant at all, you will never have fruit." That sentiment is shared by Shakib Noori, p.r. director of the Afghanistan Investment Support Agency, the country's business-licensing body. Afghanistan imports some $5 billion worth of goods every year, and "half of those products could be produced here in Afghanistan," says Noori. "Dairy, foodstuffs, cement—there are huge opportunities, but the problem is that there is no infrastructure." Most of the country is out of reach of an electrical grid. Even in Kabul, residents receive just three hours of electricity a day. Although a national highway system is scheduled to be completed by 2010 and a planned electrical line from Tajikistan and Uzbekistan in the north could light up Kabul by 2008, Afghanistan's unstable political situation is a further deterrent to foreign investment.

Government corruption is also a formidable obstacle, as it is in many developing countries. "If you need land, you have to pay a bribe," says Kazimi, the former Commerce Minister. "Electricity, you have to pay someone off. To import goods, you have to pay baksheesh. Everyone has a 'tax.'" Those who refuse to pay risk losing out to their business rivals. When Roshan, a cellular-phone company jointly owned by the Geneva-based Aga Khan Development Network, Monaco Telecom and MCT Corp. of the U.S., began building a network in Afghanistan in 2002, transmission equipment languished in customs for months, says Roshan CEO Karim Khoja, because the company refused to pay bribes. Leases on prime land were also lost, and bureaucrats demanded free airtime and SIM cards, says Khoja.

Yet Khoja adds that it's certainly possible to operate a clean business and succeed in Afghanistan. Roshan is the largest carrier in the country. It has a million customers, a market share of about 60% and generated revenues of $100 million in its 2005 fiscal year. But to get there, Roshan had to make plenty of adjustments. Afghanistan has no functioning mail system or credit-card services, so billing methods prevalent in the West couldn't be used. Instead, customers get airtime by purchasing prepaid calling cards from roughly 4,000 vendors who are Roshan franchisees. In Kabul, the vendors, most of them selling cards on the street, earn about $100 a month, much more than most laborers. "We are creating an entrepreneurial middle class," says Khoja. Roshan is also helping to entertain the masses by sponsoring one of Afghanistan's most popular TV shows, a knockoff of American Idol called Afghan Star, which follows aspiring celebrities as they perform for a national audience. Viewers vote for their favorites by sending messages via their mobile phones. The revenue generated by the additional traffic is split between Roshan and programmer Tolo TV.

Supporting such programming in a pious country was a gamble. Under the Taliban, musical performances were banned. So was TV. But today, media company Moby Capital Partners, owner of Tolo TV, is prospering. Tolo TV's mix of news, sports, music, reality shows and Indian soap operas draws nearly two-thirds of the country's viewers, according to a recent survey by a Kabul consulting company. Tolo, one of six private stations in Afghanistan, has drawn the ire of conservatives who decry its use of female presenters. But its programs appeal to young Afghans (half the population is below the age of 20), and advertisers are stepping up. Saad Mohseni, an Afghan exile who spent most his adult life as a stockbroker in Australia before returning in 2002 to found Moby, estimates that the country's ad spending on all media is currently around $10 million a year. Capturing that revenue, he says, is simply a matter of taking a chance and getting the formula right.

A handful of foreign investors have been willing to take their chances. Foreign direct investment increased by 35% in 2005 to $253 million, according to the ADB, putting Afghanistan on par with a country like Sri Lanka. Besides Coca-Cola, multinational firms such as DHL, Standard Chartered Bank, the Hyatt hotel group, Toyota and Alcatel have also set up Afghan operations. In hope of convincing more to take the plunge, the ministry of commerce is reassessing tax laws, and groups like Afghanistan Investment Support Agency are helping to build industrial parks to encourage manufacturing. A steady rise in consumer spending should also boost the economy—for nearly 30 years, Afghans have been deprived of basic consumer goods, and they are eager to catch up. President Karzai, not surprisingly, has been eager to draw attention to these rays of economic sunshine. "Whoever invested in Afghanistan in the past four years has earned a lot," he said a few months ago at a conference to attract foreign investment. "Those who invest now in the still fresh, needy, greedy market in Afghanistan will make a lot."

He may be right. One thing is for sure: the nation's yearning for a better future has never been more intense. Just ask Khan as he waits in line to open his account at Azizi Bank: "The economy is moving forward. Afghans are hungry. We are tired of war and we want to buy. We want to build. But I hope there is no more fighting—if that happens it will destroy everything."

• Aryn Baker
• The commercial landscape is rife with risk, but hardy entrepreneurs and multinational giants are betting that the Afghan economy will rise from the ashes