Welcome to my Kabul-based crime blog. I will post analyses of real life crimes that highlight the connections between crime and politics in Afghanistan. I will also link to articles that shine a light on the dark side of life in the Afghan capital.

In addition to this I will also review both contemporary and vintage crime fiction mostly revolving around random books I am able to buy or find. As ever I welcome your comments and analysis.

DTK Molise.

Monday, 6 September 2010

Gangster Capitalism: The Unfortunate Reality of Kabul Bank

Afghanistan has once again been in the headlines for all the wrong reasons. The whole system of banking, regulation and financial gangsterism in the country has been put in the spotlight leading to a widespread run on the bank by thousands of worried customers who have been removing their money on a daily basis.

It appears that this crisis has its root in stories printed by the Wall Street Journal where accusations were made that Kabul Bank, Afghanistan’s largest commercial bank was running on fumes due a number of high-level financial gambles, off-book loans, nepotism and involvement in politics. (http://online.wsj.com/article/SB10001424052748703467004575464061940925000.html).

This Bank Will Not Fail

So far these have been the words on the lips of all those in support of Kabul Bank. The central government and central bank have all promised that on the one hand Kabul Bank still has access to significant capital and is not in crisis and on the other hand promised that The Central Bank of Afghanistan will guarantee all deposits. The main problem with all of these pronouncements is that nobody believes a word the government says.

In a functioning political system the government would allay the fears of customers and people would generally believe them. In Afghanistan the opposite is true. Every day Afghan national news is reporting to people that Kabul Bank is sound, is supported by the state and has no problems. Every day more and more people are failing to believe a word that is said. This is not just a financial crisis but a political one too.

Too Corrupt To Fail*

Owned by its previous Chairman Sherkhan Farnood (28%) and CEO Khalilullah Ferozi (28%) Kabul Bank has been at the epicentre of capitalist development in Afghanistan and has grown to have assets of over one billion US Dollars.** However this money has been seen as the play-stuff of executives. According to the WSJ nearly 200 million US Dollars was invested in the Palm Jumeira development in Dubai a year or so before the world financial crash. These same apartments have now lost at least 50% of their value.

These apartments are now in the hands of family members of senior executives and political allies, which hardly seems an appropriate use of commercial bank deposits. In fact these are the tactics of gangsters who feel no connection to their clients and believe they have some god given right to use funds as they see fit. And of course as long as they scratched the right backs (such as funding Karzai’s re-election campaign) they can be sure that no one will speak out against them. Of course even in a country as corrupt as Afghanistan the truth will always out.

Many large companies deposit their cash with the Bank, payments to staff are made through the bank and even the government pays the salaries of ANA and ANP members through its system yet there appears to have been little or no regulation on how executives use the money entrusted to them. Armoured Land Cruisers for flashy relatives of high-level executives, blocks of flats in Dubai given to connected people. This has been the reality of Kabul Bank.

It remains to be seen if Kabul Bank will ever recover from this huge crisis. The Chairman and CEO have been fired but this has caused panic and the questions of whether the Afghan Central Bank is independent enough to force through major changes is still open to doubt. If it is to survive its working practices will need to be changed dramatically and even then building restored confidence with its customers will take months, if not years, of prudent development.

If Kabul Bank is allowed to collapse it is clear to me that Kabul, perhaps the only major success story that NATO can point to, will be hit by major riots and civil unrest. Kabul may well burn like the rest of the country. Whilst propping up a bank riven with debt, corruption and illegal practices will not help to develop Afghanistan’s burgeoning economy, and it may even be country productive due to the fact that it signals further impunity to corrupt officials, I believe it is the only option for a city that is only one crisis away from major strife.

The Afghan Way

France24 write that “for years Sherkhan Farnood insisted he was doing business the Afghan way”. According to my understanding I think he might be right – nepotism, grand gestures, explicit flaunting of wealth, and constant failure to tell the truth are a hallmark of “the Afghan way” in Karzai’s brave new Kabul. Unfortunately this does not appear to be the correct way to run a functioning commercial bank. 

As usual it is the man and woman in the street who will suffer due to the crimes of others.  What makes this crisis so depressing is that Kabul Bank is clearly not the only bank that operates in the same way.  I do not think it would be out of place to speculate that all Afghan banks are currently running their operations in a similar way to Kabul Bank.  So rather than this being a sign of corruption being condemned it can be seen as the sign of power shifting to other banks and finanical institutions.     

*The phrase used for this section is borrowed from Amy Davidson of the New Yorker (http://www.newyorker.com/online/blogs/closeread/2010/09/too-corrupt-to-fail.html#ixzz0ySI6LOA7)

** The Washington Post have put together an interesting graphic highlighting the cronyism at the heart of Kabul Bank. See it here: http://www.washingtonpost.com/wp-dyn/content/graphic/2010/08/31/GR2010083106533.html. 


  1. What a mess, what an unholy mess. And I'm so ashamed of the role the US has played in propping up such a government.

  2. Whilst it is easy to blame the US for what is a happening in Afghanistan (and correct in some ways) I am not sure this is can be levelled at them.

    I am fully behind the belief that this is a true Afghan problem related to their obesession with "The Afghan Way", or as I term it: "The Wrong Way".