Financial crisis is not a luxury reserved for rich countries. The story of Kabul Bank in Afghanistan is of lust for fortune and loss of money for the poor. The bank, which is part-owned by the brother of Afghan President Hamid Karzai, is on the edge of a $1 billion collapse. Thousands of people have withdrawn over $200 million in past weeks, while others have been denied access to the bank by armed guards.
Banking on Karzai
Juan Cole, an American historian and academic who blogs about Afghanistan and Middle East, writes:
The story begins with Sherkhan Farnood, a financier who founded Da Kabul Bank after the fall of the Taliban. Over the years he appears to have used the institution for patronage for politicians and their families. Farnood gave millions to the presidential campaign of Hamid Karzai last summer, a campaign that Karzai was accused of only winning through substantial ballot fraud. (Hint: a vote wouldn’t cost much to buy in Afghanistan, and ‘millions’ would buy a lot). The other top executive at the bank, Khalilu’llah Frozi, was a campaign adviser to Karzai. Hamid Karzai’s brother Mahmoud has a 9% share in the bank…The Karzai government is corrupt and rotten to the core. Not a single US soldier should die to prop it up.
Paiman Majedi, an Afghan blogger in Afghanistan writes [fa] that President Karzai's brother Mahmoud Karzai and the Afghan president's deputy, Hussein Fahim, are both important shareholders in the bank.
I went to the bank. It was crowded with people wanted to take their money out. I was asked to come back tomorrow after long hours of waiting… If the government and the Afghanistan central bank do not intervene fast, Kabul Bank will collapse… This crisis raises concerns about the activities of private banks in Afghanistan.
Afghanistan Economy, a blog that covers economic news in Afghanistan writes [fa]:
The collapse of Kabul Bank could undermine the war against the Taliban. The bankruptcy of this bank could also hurt the private sector and investment in Afghanistan. The struggle to save this bank continues from the private sector to the presidency…
Mahmoud Hakimi, an Afghan blogger and journalist, writes in his blog, Tabarghanak [fa]:
…People ask, if the Afghan government guarantees the bank then who will guarantee the people? Hundreds are going to the Kabul Bank to take their money out… Poor people with thousands of hopes deposited their money in this bank, when they hear that bank managers bought luxury mansions in Dubai with their money, they become even more worried.
As I note in my entry, the collapse of Kabul Bank has reversed the great work done in the past decade to build trust for a banking system.