News / Asia

Kabul Bank Scandal Tests Afghan Stability

Central Bank Governor Abdul Qadir Fitrat (File Photo)
Central Bank Governor Abdul Qadir Fitrat (File Photo)



Afghanistan’s largest lender, Kabul Bank, is embroiled in a corruption scandal threatening billions of dollars in international aid. The International Monetary Fund says its support to the country depends on whether officials can fix the problems that led to the bank’s collapse and government takeover last year.

The situation got even more complicated this week. Afghanistan issued an arrest warrant for Central Bank governor Abdul Qadir Fitrat, after he fled to Washington and resigned his post.

In an interview with VOA, the former central bank chief said he feared his life was in danger from those he tried to prosecute for "stealing millions" from Kabul Bank.

Abdul Qadir Fitrat speaks with VOA's John Walker in Washington:

But the Afghan government says Fitrat is the guilty party, and was involved in massive fraud at the bank.

VOA’s Kate Woodsome spoke with Martine van Bijlert, the co-director of the Kabul-based Afghanistan Analysts Network, about the scandal, the bank’s history, and its impact on the future of Afghanistan.

Listen to the Interview:

Abdul Qadir Fitrat told VOA there’s evidence showing a complex Ponzi scheme, designed to drain millions from Kabul Bank and flow to corrupt individuals. Is this a legitimate claim?

“Well, basically, it’s clear that the Kabul Bank didn’t operate like a normal bank. The shareholders borrowed or took large amounts of money from the bank, and invested that in very shaky investments. So some of that is still there and some of that has been lost. Basically, they used it as a private investment fund, which is not the normal way of running a bank.”

Fitrat says he’s in danger for accusing the bank’s shareholders, including the brothers of the Afghan president and vice president, of corruption. Does he have a reason to be scared?

“In Afghanistan, everything’s personal. And so if you go public and you smear someone’s name, because that’s the way it’s being seen, that’s taken very personally. Basically Fitrat briefed parliament on the research and the investigation they had done, and he named the biggest borrowers in the bank, and that included the brothers of the president and the brother of the vice president.

They were not very pleased that they were presented as corrupt individuals. Whether that goes as far as really putting his life in danger, I am not so sure. But he was very much under a lot of pressure.”

He was also under a lot of pressure from the international community to clean up this bank.

“It was very important for the international community. It actually became the main point in the negotiations between the IMF [International Monetary Fund] and the Afghan government. And the IMF is still not satisfied with how much the Afghan government has moved on this case. It’s withholding an agreement, which is making other donors withhold funds, so it’s really a big deal.

The U.S. is very closely involved in this sector. They’ve been the force pushing for resolving the banking crisis. They pushed Fitrat very hard to go public in parliament. They really want this out in the open and sorted out. It’s just very complicated because there are possibilities that a very large part of the political class is involved in this somehow. There’s been a report that said USAID, that’s been supporting the banking sector, should have been much more proactive. It’s become a very complex problem wherein actually everybody who’s involved has some blame.”

Kabul Bank handles about 80 percent of the government payroll, including salaries for policemen and teachers, so it’s really a part of sort of the running of the government. How stable is it, and what’s the potential fallout from this scandal?

“Well, what happened is that they split the bank into sort of a good running part, which is the part that handles the salaries at the moment, and then the part which holds all the loans which should never have been given. And that part is in receivership and they’re trying to get as much back from those loans as they can.

So, in principle, the good part of the bank should be stable at the moment. It’s going to probably be sold at some point, but for the moment it’s being run under the Central Bank and the Ministry of Finance. But in general, the banking system in Afghanistan is very shaky. It’s not been well regulated. That’s also why this could have happened. And it’s just not very well established yet, so there is a bit of nervousness that if any other banks get into trouble or if there are any other big media issues, it could really shake the Afghan economy.”

The bank had an unusual start. It was founded in 2004 by an international poker player, Sherkhan Farnood.

“It was founded by someone who didn’t have experience in the banking center, but he did have experience in the Hawala sector, in the informal money transporting sector. This is part of the lack of regulation within the banking system that people with no prior experience could set up large banks like that and play such a central role in the Afghan economy.”

Afghanistan has issued an arrest warrant for Fitrat, who has U.S. residency. How is this going to affect the already strained U.S.-Afghan relations?

“It’s going to be very interesting to watch who’s going to be the new head of the Central Bank. Because it’s such an important issue for the United States, they will find it very important that it’s someone they can work with; that it’s someone who’s seen as professional and proactive and who will want to clean up the banking sector. There has been sort of a history of appointing people to spite the U.S. or the international community, or to annoy them.

In the negotiations about the IMF agreement, the Minister of Finance has come out saying, ‘I’m sorry I’ve done everything I’ve needed to do. They’re still not happy, it’s a waste of my time.’ So that could become very contentious. On the issue of Fitrat and his extradition, I think the U.S. is going to be looking very carefully at what the allegations are and how much they may or may not be true. There could be truth in them, it could also be a form of retaliation. I’d be surprised if the U.S. extradites him.”

You May Like

Germany Celebrates 25 Years of Unity

October 3 is a public holiday, marking the day in 1990 when East Germany and West Germany reunited More

Analysts: Russia's Syria Strikes Shake Regional Powers

If Moscow bolsters Assad, Saudi Arabia, other Gulf countries may feel obliged to step in More

Video Innovative Nano-Tech Water Filter Prevents Disease

It can absorb contaminants like copper, bacteria, viruses and pesticides, says Askwar Hilonga, who has been successfully trying out his product in Arusha More

This forum has been closed.
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Russia’s Syria Involvement Raising Concerns in Europei
Luis Ramirez
October 02, 2015 4:45 PM
European nations are joining the United States in demanding that Russia stop targeting opposition groups other than the Islamic State militants as Russian warplanes continue to conduct raids in Syria. The demand came in a statement from Britain, France, Germany, Qatar, Saudi Arabia, Turkey and the United States Friday. VOA Europe correspondent Luis Ramirez reports.

Video Russia’s Syria Involvement Raising Concerns in Europe

European nations are joining the United States in demanding that Russia stop targeting opposition groups other than the Islamic State militants as Russian warplanes continue to conduct raids in Syria. The demand came in a statement from Britain, France, Germany, Qatar, Saudi Arabia, Turkey and the United States Friday. VOA Europe correspondent Luis Ramirez reports.

Video First Self-Driving Truck Debuts on European Highways

The first automated semi-trailer truck started its maiden voyage Friday, Oct. 2, on a European highway. The Daimler truck called 'Actros' is the first potentially mass-produced truck whose driver will be required only to monitor the situation, similar to the role of an airline captain while the plane is in autopilot mode. VOA’s George Putic reports.

Video Nano-tech Filter Cleans Dirty Water

Access to clean water is a problem for hundreds of millions of people around the world. Now, a scientist and chemical engineer in Tanzania (in East Africa) is working to change that by creating an innovative water filter that makes dirty water safe. VOA’s Deborah Block has the story.

Video Demand Rising for Organic Produce in Cambodia

In Cambodia, where rice has long been the main cash crop, farmers are being encouraged to turn to vegetables to satisfy the growing demand for locally produced organic farm products. Daniel de Carteret has more from Phnom Penh.

Video Migrant Influx Costs Europe, But Economy Could Benefit

The influx of hundreds of thousands of refugees and migrants is testing Europe’s ability to respond – especially in the poorer Balkan states. But some analysts argue that Europe will benefit by welcoming the huge numbers of young people – many of them well educated and willing to work. Henry Ridgwell reports from London.

Video Botanists Grow Furniture, with Pruning Shears

For something a bit out of the ordinary to furnish your home, why not consider wooden chairs, crafted by nature, with a little help from some British botanists with an eye for design. VOA’s Jessica Berman reports.

Video New Fabric Helps Fight Dust-Related Allergies

Many people around the world suffer from dust-related allergies, caused mainly by tiny mites that live in bed linen. Polish scientists report they have successfully tested a fabric that is impenetrable to the microscopic creatures. VOA’s George Putic has more.

Video Burkina Faso's Economy Deeply Affected by Political Turmoil

Political turmoil in Burkina Faso over the past year has taken a toll on the economy. The transitional government is reporting nearly $70 million in losses in the ten days that followed a short-lived coup by members of the presidential guard earlier this month. The crisis shut businesses and workers went on strike. With elections on the horizon, Emilie Iob reports on what a return to political stability can do for the country's economic recovery.

Video Fleeing Violence, Some Syrians Find Refuge in Irbil

As Syrians continue to flee their country’s unrest to seek new lives in safer places, VOA Persian Service reporter Shepol Abbassi visited Irbil, where a number Syrians have taken refuge. During the religious holidy of Eid al-Adha, the city largely shut down, as temperatures soared. Amy Katz narrates his report.

Video Nigeria’s Wecyclers Work for Reusable Future in Lagos

The streets and lagoons of Africa's largest city - Lagos, Nigeria - are often clogged with trash, almost none of which gets recycled. One company is trying to change that. Chris Stein reports for VOA from Lagos.

Video Sketch Artist Helps Catch Criminals, Gives a Face to Deceased

Police often face the problem of trying to find a crime suspect based on general descriptions that could fit hundreds of people in the vicinity of the crime. In these cases, an artist can use information from witnesses to sketch a likeness that police can show the public via newspapers and television. But, as VOA’s Greg Flakus reports from Houston, such sketches can also help bring back faces of the dead.

Video Thailand Set to Build China-like Internet Firewall

Thai authorities are planning to tighten control over the Internet, creating a single international access point so they can better monitor content. VOA Correspondent Steve Herman reports from Bangkok on what is being called Thailand’s own "Great Firewall."

Video Croatian Town’s War History Evokes Empathy for Migrants

As thousands of Afghanistan, Iraqi and Syrian migrants pass through Croatia, locals are reminded of their own experiences with war and refugees in the 1990s. VOA's Daniel Schearf reports from the town of Vukovar, where wartime scars still are visible today.

Video Long Drought Affecting California’s Sequoias

California is suffering under a historic four-year drought and scientists say even the state's famed sequoia trees are feeling the pain. The National Park Service has started detailed research to see how it can help the oldest living things on earth survive. VOA’s George Putic reports.

VOA Blogs