Afghanistan’s troubled bank
House of Karzai
A bank run exposes more murky financial and political dealings
By The Economist, Sept. 9, 2010
PALM JUMEIRAH, the giant palm-shaped peninsula in the Persian Gulf, is famous for its luxury homes. In Kabul one frond is known as Little Afghanistan because so many of the country’s political and business elite have set up there. Mahmoud Karzai, a brother of the Afghan president, Hamid Karzai, is a prominent figure there. Luckily for him, he had help paying for it. As with other luminaries, the bill was picked up by ordinary Afghans who put money into Kabul Bank, a scandal-wracked institution of which the brother is the third-biggest shareholder.
For years bank assets (of over $1 billion at one point) have been spent as shareholders saw fit, often defying bank regulations designed to stop risky investments. Hundreds of millions went into Dubai properties then handed to shareholders and their friends (Mahmoud Karzai says he made a profit of at least $800,000 after buying a villa in Dubai in 2007, using a loan from Kabul Bank). More went to loss-making firms, including an airline and a cement factory, run by shareholders and friends.