How to survive as a bank in Afghanistan

ECONOMISTS think of the opportunity cost of money as one reason to hold a bank deposit: rather than skulk under a mattress, cash could earn interest. In volatile, war-torn Afghanistan, neither option appeals. Money has to be kept secure somehow, but a bad bank might make off with its depositors’ money. In 2010 Kabul Bank collapsed after a spree of insider loans to shareholders, including a brother of the then president. A central-bank bail-out cost nearly 7% of GDP. Much of the nearly $1bn stolen has not been recovered.

A bank that customers trust, though, is in a strong position. So Afghanistan International Bank (AIB) does not pay any interest on its deposits, says Anthony Barned, its British chief executive. AIB was set up by the Asian Development Bank and private investors in 2004, and is the largest private bank in Afghanistan, holding $790m in deposits, around one-fifth of the country’s deposit base. It is also the most profitable.

As the only private institution with a dollar-clearing facility with big...

via The Economist: Finance and economics Business Feeds

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