AIB aims to extend Afghanistan-UAE financial ties
By Sadaf Shinwari - Tue Dec 04 2012, 2:19 pm
In Dubai for a quarterly board meeting, Afghanistan International Bank (AIB) looks to extend maturing business ties with UAE financial institutions whilst the two countries are drawn closer together through financial and social links.
Speaking after the meeting, Khalilullah Sediq, Chief Executive Officer of AIB and former governor of the Afghanistan Central Bank quoted by CPI Financial said, “Trade between Afghanistan and the UAE was already some AED 2 billion in 2011, which may sound modest but is actually a hugely important amount in an economy recovering from years of war.
“The UAE is a key trading partner for Afghanistan, because of its location, good business environment, and the fact that the Afghan community within the UAE forms the second largest diaspora of Afghans after the United States. Targeting this inter-country economic activity therefore, has become a fundamental aspect to AIB’s growth strategy.”
There are thought to be up to 200,000 Afghans living in the UAE. As UAE based companies continue to see commercial opportunity within the pre-emerging market of Afghanistan, it is essential for the economic development of Afghanistan that there exists a viable and trusted financial institution to support this activity.
“Despite the challenges faced in Afghanistan, commercial success for AIB continues to grow because of an increase in the market share of domestic clients and the expansion of foreign companies turning to AIB as the viable banking option within the country,” Sediq said.
In the meatnime Afghanistan International Bank (AIB), the biggest commercial bank in the country, is seeking to attract business in Dubai and to invest its US$800 million (Dh2.93 billion) worth of liquidity with banks abroad. But it is facing difficulties.
The Afghan nascent banking system has been “tainted” after the collapse of Kabul Bank, Ronald Stride, the chairman of the board of supervisors at AIB, said in an interview with The National.
“The picture has been painted in a very negative way and people have … not a wrong impression, but a one-sided impression,” he said. “So we have taken it upon ourselves to try and paint a more balanced picture of banking and finance in Afghanistan.”
Kabul Bank experienced a run on deposits in 2010, following the revelation that shareholders had used it as their personal funding vehicle. According to a report, published in March by the central bank, about $900m in loans were made to bank officers and insiders – including shareholders – with little or no collateral.
The majority of those were connected to 19 related parties.
More than 100 rubber stamps for shell companies were used to provide fake documents a patina of legitimacy for a “well-concealed Ponzi scheme”, the investigative firm Kroll said in a report, The New York Times revealed last week.
“The problem with the way that the patronage system works in the country, is that if you are well-connected you can get access to credit from any bank,” said Peter Middlebrook, the managing director of Geopolicity, an international management consultancy and think tank. “The regulatory environment and regulatory enforcement is phenomenally weak.
“Nothing can be worse than what happened to Kabul Bank, the ramifications of which are expected to be felt in Afghanistan for many years to come.”
Major UAE companies such as Etisalat are among AIB’s over 100,000 clients. Afghanistan International Bank has been steadily increasing links with UAE financial institutions. The bank has developed a set of special relationships with local UAE banks, who introduce clients that want to do business in Afghanistan to the Afghanistan International Bank. AIB is meeting with Emirates NBD to extend these relationships further.
In Afghanistan itself, the bank in September completed a strategic Cooperation Agreement with Standard Chartered, which enables Standard Chartered to service its clients in Afghanistan through AIB.