September 10, 2010
Eric Ellis
On the verge of collapse, Kabul Bank operates in a financial
system we would barely recognise.
SHANE Warne's post-cricket pursuits and the murky nightmare that is Afghanistan would not appear to be obviously connected.
But had you swung by London's Empire Casino in 2008 during the World Series of Poker, you'd see the link, a connection that might have given some pause for thought - less for the Warne family soap opera but more if you worry about the Australian lives your taxes have placed in harm's way ''defending freedom'' in Afghanistan.
Vying to be the world champ of poker - £20,000 up front to be seated, if you don't mind - was Our Warnie and his comrade-in-cards, Sher Khan Farnood who, despite sounding like a character from Kipling's Jungle Book, also happens to own Afghanistan's biggest private bank, Kabul Bank.
That's where the superlatives end, for gross mismanagement and corruption at Kabul Bank have done much more to guarantee a Taliban victory than any Koran-burning in Florida or lost battle in Helmand, Afghanistan. Part-owned by Afghan President Hamid Karzai's brother, Kabul Bank totters on the edge of a $1 billion collapse. Its branches have been besieged by thousands of depositors, mostly Afghanistan's working poor, who have withdrawn $200 million over the past week. Others still can't get their savings out, turned away by government goons at gunpoint.
It's a mess, not least because Kabul Bank is the vehicle used to pay Afghan government salaries, mostly the military and police, the very same - and sometimes mutinous - security forces that the US, Australia and other members of the Western alliance trying to keep Afghanistan safe from extremists say they will, eventually, hand their duties to.
The head of the country's central bank, a close associate of the ruling Karzai clique, unconvincingly says everything is fine at Kabul Bank and blames the media. Before returning to Kabul to again run the central bank (the Taliban interrupted his first stint in 1996), this particular governor sold carpets in the US. For its part, the US says it won't bail out Kabul Bank. But if the bank goes down, so may much of the rest of the finance sector as confidence plummets.
Then again, just as corruption-plagued Afghanistan doesn't much resemble an economy, Kabul Bank isn't really a bank as we would know it, and operates in a financial system we would barely recognise. Its biggest customers seem to be its owners, who bought $300 million worth of Dubai properties at the height of the boom using Kabul Bank funds. Its most popular product is actually a lottery, called Bakht, which means ''fortune''. Touted as ''the easiest way to make a million'', gamblers buy tickets by depositing 5000 afghanis - about $110 - in a Bakht account. A lucky draw for a million afghanis is held every month and beamed live around the country on state TV. Prominent Afghans, like Sher Khan, pull the winning tickets from a tub. I'm not sure a woman has ever won. Kabul Bank's deposit base quadrupled after it introduced Bakht. Naturally, when its competitors saw deposits rushing to Kabul Bank, they introduced similar products. Now, Afghan banking resembles Tattslotto on steroids.
Gambling is banned in Islam - and Kabul is, after all, the capital of the Islamic Republic of Afghanistan. So, when I asked Kabul Bank's then CEO about Bakht, he told me straight-faced that it was "an Islamic banking product coinciding with religious sentiments". That's because Kabul Bank pays no interest on its Bakht accounts, and losing tickets qualify for the next draw, so long as 5000 afghanis is kept as a balance. ''No, you cannot say it is a lottery,'' he insisted. ''Here you don't lose your money, you are getting an incentive by way of luck.''
The tremors in Afghan banking create bigger headaches for the Western officials trying to modernise Afghanistan. The region's long-preferred method of money movement and storage has been Islam's hawala system, where cash placed for a relative or a business deal with a broker in, say, a Peshawar bazaar, will be collected by the intended recipient through a broker elsewhere, with commissions extracted en route. Based on trust, hawala is informal and paperless but it has worked for centuries across south Asia and the Middle East, and even into the West via immigration and SMS. But Washington believes hawala was also the way monies were moved to help finance terror, and its striven to wean Afghans off hawala and into conventional banks. It has tipped millions of dollars in aid and training into developing a financial system in Kabul, while encouraging the hawala barons to modernise their business.
Sher Khan (pictured top left) is a hawala baron. I had wanted to interview him and ask if he used Kabul Bank's funds to finance his poker career. But he said he couldn't talk as he was on his way to the World Poker Championships in Las Vegas, where he was runner-up in the Pot-Limit Omaha championship. Like Warnie, Sher Khan has quite the profile on world poker tables, appearing in YouTube interviews during big tournaments as ''an Afghan success story''.
His player profile on pokerpages.com has him self-described as a 49-year-old father of four from northern Afghanistan. ''I belong to the most poor family of Afghanistan (sic),'' he says. ''I born (sic) in 1961 in Jamanchi village of Khanabad district of Kunduz province in Afghanistan. Due to my struggle and hard working, I become able to found a millions dollar and become chief director of Kabul Bank.'' He lists his hobbies as ''cricket, football, playing cards, horse riding, listening to the rock music''. His favorite place is ''Sidney, Australiya''.
Asked by his poker profiler if he could change anything in the world, Sher Khan said ''poverty''. It's just as well most of his suddenly poverty-stricken depositors banging down the doors of his bank don't have internet access.